Question

If Comcast is upgrading its cable boxes and has 560 obsolete boxes in ending inventory.

Beginning inventory and purchases	Boxes			Box cost			Total cost
Beginning inventory: January 1		16,100		$	21		$	338,100
March 1		7,100			22			156,200
June 1		3,100			26			80,600
September 1		1,800			29			52,200
December 1		1,000			38			38,000
		29,100					$	665,100

What is the cost of ending inventory using FIFO, LIFO, and the weighted-average method

Answer 1

1) FIFO Method

FIFO means First-In First-Out.

Number of boxed in ending inventory = 560

As per this method, the 560 units of beginning inventory must be from December.

Box cost of purchases on December 1 = $38

:. Value of ending inventory = 560 boxes * $38 = $21,280

  

2) LIFO Method

LIFO means last in first out.

So the ending inventory of 560 units must be from the beginning inventory .

Box cost in beginning inventory= $21

:. Value of ending inventory = 560 boxes * $21 = $11,760

3) Weighted Average Method

Under this method, ending inventory is calculated as follows:

Box cost of inventory =

Gross Total Cost ÷ Total number of boxes

= $665,100 ÷ $29,100

= $22.85567

= $22.86 (approx.)

Value of ending inventory =

560 boxes * $22.86 = $12,801.6

= 12,801.6

= $12,802 (approx.)