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7 January, 21:33

Cortez Company sells chairs that are used at computer stations. Its beginning inventory of chairs was 240 units at $46 per unit. During the year, Cortez made two batch purchases of this chair. The first was a 310-unit purchase at $51 per unit; the second was a 375-unit purchase at $53 per unit. During the period, it sold 610 chairs. Required Determine the amount of product costs that would be allocated to cost of goods sold and ending inventory, assuming that Cortez uses FIFO.

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  1. 7 January, 21:57
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    The correct answer for cost of goods sold is $30,030 and ending inventory is $16,695.

    Explanation:

    According to the scenario, the computation of the given data are as follows:

    First we calculate the total cost of goods purchased.

    Hence,

    Beginning Inventory = Total units * Rate

    Where, Total units = 240

    Rate = $46 / unit

    So, Beginning inventory = 240 * $46 = $11,040

    First Purchase

    Where, Total units = 310

    Rate = $51 / unit

    So, First purchase = 310 * $51 = $15,810

    Second Purchase

    Where, Total units = 375

    Rate = $53 / unit

    So, Second purchase = 375 * $53 = $19,875

    Hence, Cost of Goods Available = Beginning inventory + First purchase + Second purchase

    = $11,040 + $15,810 + $19,875

    = $46,725

    So, we can calculate cost of goods sold using FIFO are as follows:

    Total sold chairs = 610 units

    So, Beginning inventory = Total units * Rate

    Where, Total units = 240

    Rate = $46 / unit

    So, Beginning inventory = 240 * $46 = $11,040

    First Purchase

    Where, Total units = 310

    Rate = $51 / unit

    So, First purchase = 310 * $51 = $15,810

    Second Purchase

    Where, Total units = 60

    Rate = $53 / unit

    So, Second purchase = 60 * $53 = $3,180

    So, Cost of Goods sold = Beginning inventory + First purchase + Second purchase

    = $11,040 + $15,810 + $3,180

    = $30,030

    And Ending inventory = Cost of Goods Available - Cost of Goods sold

    = $46,725 - $30,030

    = $16,695
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