Zimmerman Inc. Uses A Periodic Inventory System. Details For The Inventory Account For The Month Of October Are Shown Below:

1. Calculation Of Ending Inventory

Here we are required to calculate ending inventory by using FIFO cost method. As we know 80 units on out of 300 units, so we now multiply these units X $5.00 per units as we start to sell 220 units from first 50 units to the next until all the 220 units are sold out in the market. So, ending inventory under FIFO can be calculated as shown below:

Ending Inventory = 80 units X $5.00 = $400

Here Cost of Goods Sold = (50 units X $4.00) + (100 units X $4.50) + (70 units X $5.00) = $200 + $450 + $350 = $1,000

We can say that under FIFO, 50 units from beginning inventory, 100 units from October 10 purchases and remaining 70 units from October 20 purchases are utilized.

So, the correct option of this multiple choice question (mcq) is (a). All other options (b, c and d) are incorrect choices here.

2. Calculation Of Cost Of Goods Sold

Now, we are required to calculate cost of goods sold under LIFO (Last-In, First-Out) costing method. As 80 units on hand at the end of the month of October, so it means we sold 220 units out of total 300 units. So, we start to sold units from last 150 units to the previous units until all the 220 units are sold out to the customers in the market.

Cost of Goods Sold = (150 units X $5.00) + (70 units X $4.50) = $750 + $315 = $1,065

We can say that under LIFO, 150 units from October 12 purchases and remaining 70 units are sold out from October 10 purchases.

If we calculate here ending inventory, then we get the following:

EI = (30 units X $4.50) + (50 units X $4.00) = $135 + $200 = $335

So, the correct option is (c).