Fabulous Frames Frame Shop wants to know the effect of different inventory costing methods on its financial statements. Inventory and purchases data for June are:
Units Unit Cost Total Cost
Jun 1 Begining inventory 2,200 $ 13.00 $28, 600
4 Purchase 1,700 $ 13.40 22,780
9 Sale (1900)
Required:
1. If Fabulous Frames Frame Shop uses the FIFO method, the cost of the ending inventory will be _________.
A. $ 25,000.
B. $ 26, 680.
C. $ 22, 780.
D. $ 24, 700.

FIFO (First-In-First-Out) is a method of inventory valuation whereby the inventory that comes first is used first. In other words, the oldest inventory is used first. This is common for perishable stocks which if held too long would be wasted.

Jun 1 : Beginning Inventory : 2200 units x $13 = $28600

Jun 4 : Purchases : 1700 units x $13.4 = $22780

Total units : 2200 + 1700 = 3900 units

Sales : 1900 units

Cost of Goods Sold would be:

1900 x $13 = $24700

Ending inventory:

(2200 - 1900) x $13 = $3900

1700 x $13.4 = $22780

Ending inventory : $3900 + $22780 = $26,680

Sam1s Sam1s · Answer 2 · 2022-02-25T18:57:06+01:00

If Fabulous Frames Frame Shop uses the FIFO method, the cost of the ending inventory will be:

B. $26680

"FIFO (First-In-First-Out)"

First In, First Out (FIFO) is an bookkeeping strategy in which resources acquired or obtained to begin with are arranged of to begin with.

FIFO accept that the remaining stock comprises of things acquired last.

Jun 1 : Beginning Inventory : 2200 units x $13 = $28600

Jun 4 : Purchases : 1700 units x $13.4 = $22780

Total units : 2200 + 1700 = 3900 units

Sales : 1900 units

Cost of Goods Sold =Sales*Total Units

Cost of Goods Sold=1900 x $13

Cost of Goods Sold= $24700

Ending inventory:

(2200 - 1900) x $13 = $3900

1700 x $13.4 = $22780

Ending inventory : $3900 + $22780

Ending inventory= $26,680

Thus, the correct answer is B.

Learn more about "FIFO":

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