The business purchased 100 units at $5, 200 units at $7, 150 units at $6. If 250 units are sold, what is the ending inventory value under FIFO?

The business purchased 100 units at $5, 200 units at $7, 150 units at $6. If 250 units are sold, what is the ending inventory value under FIFO?

• A. $100
• B. $550
• C. $1,250
• D. $1,800

Answer: (C)

Under FIFO, you assume the oldest purchases are sold first, so for 250 units sold you take 100 units from the $5 batch and 150 units from the $7 batch. This makes the cost of goods sold 100×5 + 150×7 = 500 + 1,050 = 1,550. The remaining inventory consists of the un sold portions: 50 units from the $7 batch (200 bought minus 150 sold) at $7 each, and all 150 units from the $6 batch at $6 each. Ending inventory value = 50×7 + 150×6 = 350 + 900 = 1,250. So the ending inventory is $1,250.

Under FIFO, you assume the oldest purchases are sold first, so for 250 units sold you take 100 units from the $5 batch and 150 units from the $7 batch. This makes the cost of goods sold 100×5 + 150×7 = 500 + 1,050 = 1,550. The remaining inventory consists of the un sold portions: 50 units from the $7 batch (200 bought minus 150 sold) at $7 each, and all 150 units from the $6 batch at $6 each. Ending inventory value = 50×7 + 150×6 = 350 + 900 = 1,250. So the ending inventory is $1,250.