Under FIFO, what is the ending inventory value after selling 250 units from 100 units at 50 and 200 units at 60?

Under FIFO, what is the ending inventory value after selling 250 units from 100 units at 50 and 200 units at 60?

• A. 5,000
• B. 3,000
• C. 14,000
• D. 15,000

Answer: (B)

FIFO means costs flow from oldest to newest, so the ending inventory is made up of the most recently purchased units that weren’t sold. Here we start with 100 units at 50 and 200 units at 60. We sell 250 units: first 100 units from the 50 batch are sold, leaving none of that batch. Then 150 units are sold from the 60 batch, leaving 200 − 150 = 50 units still on hand at 60. The ending inventory value is 50 × 60 = 3,000. The other options would require leftovers from the cheaper batch or selling all of the expensive batch, which doesn’t occur under FIFO with these quantities.

FIFO means costs flow from oldest to newest, so the ending inventory is made up of the most recently purchased units that weren’t sold. Here we start with 100 units at 50 and 200 units at 60. We sell 250 units: first 100 units from the 50 batch are sold, leaving none of that batch. Then 150 units are sold from the 60 batch, leaving 200 − 150 = 50 units still on hand at 60. The ending inventory value is 50 × 60 = 3,000. The other options would require leftovers from the cheaper batch or selling all of the expensive batch, which doesn’t occur under FIFO with these quantities.