Multiple Choice
When a food worker is storing milk cartons in the refrigerator according to the FIFO (First-In, First-Out) inventory method, which of the following actions should they take?
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5. Inventory
Periodic Inventory - FIFO, LIFO, and Average Cost
Multiple Choice
A company uses the periodic inventory system. At the end of the period, it has 200 units in ending inventory. The following purchases were made during the period:- 100 units at \$10 each- 150 units at \$12 each- 100 units at \$14 eachIf the company uses the FIFO method, what is the total cost assigned to ending inventory?
A
\$2,200
B
\$2,800
C
\$2,400
D
\$2,600
Verified step by step guidance1
Step 1: Understand the FIFO (First-In, First-Out) method. Under FIFO, the oldest inventory costs are assigned to the cost of goods sold, and the most recent inventory costs are assigned to ending inventory.
Step 2: Identify the total number of units in ending inventory. The problem states that there are 200 units in ending inventory.
Step 3: Determine the most recent purchases, as these will be used to calculate the cost of ending inventory under FIFO. The purchases are: 100 units at \$14 each, 150 units at \$12 each, and 100 units at \$10 each.
Step 4: Assign costs to the 200 units in ending inventory starting with the most recent purchase. First, take 100 units from the purchase of 100 units at \$14 each. Then, take 100 units from the purchase of 150 units at \$12 each.
Step 5: Calculate the total cost of ending inventory by multiplying the number of units taken from each purchase by their respective unit costs and summing the results. Use the formula: \( \text{Total Cost} = (\text{Units from Purchase 1} \times \text{Cost per Unit}) + (\text{Units from Purchase 2} \times \text{Cost per Unit}) \).
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