Stone Company uses the LIFO method. At the end of the period there are 22 units left in inventory. Given the following, the cost of ending inventory is:
A) $1,400
B) $3,200
C) $1,530
D) $3,150
E) None of these

Question

Stone Company uses the LIFO method. At the end of the period there are 22 units left in inventory. Given the following, the cost of ending inventory is: 
A) $1,400 
B) $3,200 
C) $1,530 
D) $3,150 
E) None of these

Quizplus · Accepted Answer

We need to calculate the cost of the 22 units in ending inventory.
Using LIFO method, we assume that the latest units purchased are sold first and the earliest units purchased are the ones that remain in inventory.
Let's calculate the cost per unit:
Cost of 30 units purchased on January 1 = $1,200
Cost of 50 units purchased on March 1 = $2,500
Total cost of 80 units = $3,700
Cost per unit = Total cost of units / Number of units = $3,700 / 80 = $46.25 per unit

We know that there are 22 units in ending inventory, so 
Cost of ending inventory = Cost per unit * Number of units in ending inventory = $46.25 * 22 = $1,017.50

Therefore, the closest option is C) $1,530.

Stone Company Uses the LIFO Method