Use this information to answer the following question. A periodic inventory system is used.
Using FIFO,the cost assigned to ending inventory is
A) $4,056.
B) $1,332.
C) $1,740.
D) $4,464.

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) $4,056. 
B) $1,332. 
C) $1,740. 
D) $4,464.

Quizplus · Accepted Answer

In a periodic inventory system, the cost assigned to ending inventory using FIFO is based on the cost of the oldest units available in inventory.

The cost of the oldest 100 units available in inventory is $10,500 (100 units x $105). The cost of the next 200 units purchased at $110 per unit is $22,000 (200 units x $110).

Therefore, the cost of goods available for sale is $32,500 ($10,500 + $22,000).

Assuming that 150 units are sold, the cost of goods sold is $16,500 (150 units x $110).

The cost assigned to ending inventory would be calculated as follows:

Cost of goods available for sale - cost of goods sold = cost of ending inventory
$32,500 - $16,500 = $16,000

Since the oldest units available in inventory are the 50 units purchased at $105 each, the cost assigned to ending inventory would be:

50 units x $105 = $5,250

However, since only 40 units are actually in ending inventory, the cost assigned to ending inventory would be:

40 units x $105 = $4,200

Therefore, the best choice is C: $1,740, which is the cost assigned to ending inventory using FIFO.

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