3) A firm has beginning inventory of 300 units at a cost of $11 each. Production during the period was 650 units at $12 each. If sales were 700 units, what is the value of the ending inventory using LIFO?

Question

A. $3,300
B. $2,750
C. $3,250
D. $2,550

Answer 1

LIFO = Last In First Out.

Whatever you just bought, or made, is what you sell next.

If I start with 5 units @$10,
then buy 7 @$20,
then sell 10,

which 10 do I sell?

I sell the _last_ 10 that I got, which will be the 7@$20 and 3 of the 5 @$10.

That will leave me with the first two I bought, which I valued @ $10 each.

Now look at your question again. Which 700 were sold? Which 250 were left?

Answer 2

It is B. $2,750