Question

In its first month of operations, Vaughn Company made three purchases of merchandise in the following sequence: (1) 330 units at $8, (2) 470 units at $9, and (3) 220 units at $10.

Assuming there are 360 units on hand, compute the cost of the ending inventory under the FIFO method and LIFO method. Vaughn uses a periodic inventory system.

		FIFO		LIFO
Cost of the ending inventory		$		$

Answer 1

FIFO:

Cost of the ending inventory = (220 units × $10) + (140 units × $9) = $3,460

LIFO:

Cost of the ending inventory = (330 units × $8) + (30 units × $9) = $2,910