Baker Bakery Company Just Began Business And Made The Following Four Inventory Purchases In June:

Baker Bakery Company Just Began Business And Made The Following Four Inventory Purchases In June: Baker Bakery Company just began business and made the following four inventory purchases in June: June 1 150 units $ 1,040 June 10 200 units 1,560 June 15 200 units 1,680 June 28 150 units 1,320 ______ $5.600 ______ ______ A physical count of merchandise inventory on June 30 reveals that there are 210 units on hand. Using the FIFO periodic inventory method, the amount allocated to ending inventory for June is a. $1,456 b. $1,508 c. $1,824 d. $1,848

Under First-In, First-Out (FIFO) method, we start to sold those items / units which was firstly purchased and then we move forward to the next purchases until all the units are sold. So, here we started to sell the units from June 1 purchases until all 490 units out of 700 units (150 + 200 + 200 + 150) are sold out and then remaining 210 units are used to show ending inventory under FIFO periodic inventory system.

      Per Unit Cost For June 1 Purchases = $1,040 / 150 units = $6.93333
Per Unit Cost For June 10 Purchases = $1,560 / 200 units = $7.8
Per Unit Cost For June 15 Purchases = $1,680 / 200 units = $8.4
Per Unit Cost For June 28 Purchases = $1,320 / 150 units = $8.8

Calculation Of Cost Of Goods Sold

As 490 units out of 700 units are sold out, so we get the following:

150 units X $6.93333 = $1,040

200 units X $7.8 = $1,560

140 units X $8.4 = $1,176

Cost of Sales or Cost Of Goods Sold (COGS) = $1,040 + $1,560 + 1,176 = $3,776

So, we can say that from June 1 purchases, we sold 150 units. After consuming 150 units from June 1 purchases, the remaining sold out units are 340 units. From June 10 purchases, we further utilized 200 units and remaining sold out units are 140 units, which are used from June 15 purchases and finally, we completely sold out 490 units.

Calculation Of Ending Inventory

Units unsold from June 15 purchases = 60 units

60 units X $8.4 = $504

150 units X $8.8 = $1,320

Ending Inventory under FIFO = $504 + $1,320 = $1,824

So, the correct option of this multiple choice question (mcq) is (c) while all other options are wrong choices here.

Comments

Post a Comment