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At the end of January, Mineral Labs had an inventory of 855 units, which cost $8 per unit to produce
At the end of January, Mineral Labs had an inventory of 855 units, which cost $8 per unit to produce. During February the company produced 1,300 units at a cost of $12 per unit.
a. it me firm sold 1,650 units in February, what was the cost of goods sold? (Assume LIFO inventory accounting.)
b. If the firm sold 1,650 units in February, what was the cost of goods sold? (Assume FIFO inventory accounting.)
Expert Solution
a). Computation of the cost of goods sold:-
In LIFO, the stock that purchased last will be sold first.
Cost of goods sold = (1,300*$12) + ((1,650-1,300)*$8)
= $15,600 + (350*8)
= $15,600 + $2,800
= $18,400
b). Computation of the cost of goods sold:-
In FIFO, the stock that purchased first will be sold first.
Cost of goods sold = (855*$8) + ((1,650-855)*$12)
= $6,840 + (795*$12)
= $6,840 + $9,540
= $16,380
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