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The following lots of Commodity D were available for sale during the year. Use this information to answer the questions that follow.

Beginning inventory 10 units at $60
First purchase 25 units at $65
Second purchase 30 units at $68
Third purchase 15 units at $75

There are 25 units of the commodity on hand at the end of the year.
What is the amount of the inventory at the end of the year using the FIFO method?

a) $3,585 b) $1,805 c) $1,575 d) $1,685

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Answer:

b) $1,805

Explanation:

Using the FIFO method, the first units bought will be the first sold. Therefore, since there are 25 units on hand at the end of the year, 15 of those units will be from the last purchase at $75 each, and the remaining 10 units will be from the second purchase at $68 each. The amount of the inventory at the end of the year is:

[tex]I = 15*\$75+10*\$68\\I=\$1,805[/tex]

The answer is alternative b) $1,805.

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