Use this information to answer the following question.
A periodic inventory system is used.
-Using FIFO,the cost assigned to ending inventory is
A)$8,112.
B)$2,664.
C)$3,480.
D)$8,928.

Question

Use this information to answer the following question.  
A periodic inventory system is used.
-Using FIFO,the cost assigned to ending inventory is
A)$8,112. 
B)$2,664. 
C)$3,480. 
D)$8,928.

Quizplus · Accepted Answer

Since FIFO method assumes that the first items purchased are the first ones sold, we need to calculate the cost of goods sold (COGS) by adding the cost of the first 5 units purchased with the cost of the next 5 units purchased. Thus, COGS would be (5 x $256) + (5 x $288) = $2,560 + $1,440 = $4,000. 
Next, we need to calculate the cost of the ending inventory, which would be the cost of the remaining 10 units. Since the last 10 units were purchased at $348, under FIFO these units would be assigned the most recent cost. Thus, the cost of the ending inventory would be 10 x $348 = $3,480. 
Therefore, the answer is (C) $3,480.

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