Question

king costume uses a periodic inventory system. The company started the month with 9 masks in its begining inventory that cost %8 each. During the month, King Costume purchased 41 additional masks for $10 each. At the end of the month, King counted its inventory and found that 3 masks remained unsold. Using the LIFO method, its cost of goods sold for the month is:______.
a. $434.
b. $440.
c. $24.
d. $428.

Answer 1

The options given in the question are incorrect. The options are correct with respect to the question if beginning inventory is 6 masks.

Answer:

The cost of goods sold for the month is $458

Explanation:

The LIFO or last in first out is a method for inventory valuation. It values the closing inventory assuming that it contains the units that were present in the inventory at the very start of the period. Thus, the cost of goods sold contains the units that were most recently purchased.

The number of units available for sale was = 9 + 41 = 50

The sales in units = 50 - 3 = 47

Out of the 47 units of masks sold, under LIFO, the 41 masks will be from the masks purchased in the month while the remaining 6 masks will be from the opening inventory as the inventory that is bought later is sold first.

The cost of goods sold for the month under LIFO will be,

Cost of Goods Sold

41 masks at $10 each                 $410

6 masks at $8 each                    $48    

Total value of COGS                  $458