Fundamentals of Cost Accounting 3rd Edition by William N. Lanen, Shannon W. Anderson, Michael Maher

Exercise 28

Assign Costs to Goods Transferred Out and Ending Inventory: FIFO Method

Refer to the data in Exercises 8-25 and 8-27. Compute the cost of goods transferred out and the ending inventory using the FIFO method.

Step 1 of 8

Inventory cost flow system

The cost of identical inventory lying in the stock may be different. Cost of inventory changes due to fluctuations in the purchase prices of inventory in the market. Hence inventory stock may have similar inventory with different prices and when the inventory is issued its cost is also sent to cost of goods sold.

There are different methods being used to transfer inventory cost to the cost of goods sold like FIFO (first in first out), LIFO (last in first out), weighted average method etc.

Under FIFO method inventory purchased first is issued first. Under LIFO method inventory purchased last is issued first.

Under weighted average method inventory is issued at weighted average unit cost. Weighted average cost is calculated by dividing the total inventory cost with total inventory counts.