39 Bat Company began the year with 4000 units of inventory p

39. Bat Company began the year with 4,000 units of inventory purchased for $4.00 per unit. On March 1, Bat Company purchased another 10,000 units for $5.00 per unit. Bat purchased another 6,000 units for $5.50 per unit on September 15. During the year Bat Company sold 15,000 units. Assuming Bat Company uses the FIFO inventory flow assumption, what was Bat Company\'s ending inventory? a. $16,000 *b. $27,500 c. $71,500 d. $21,000

Solution

Answer is b. $27,500

Given Information,

Opening inventory is 4,000 units valued at $4 per unit and 10,000 units bought at $5.00 per unit, gets exhausted in totality while selling 15,000 units as it is said that Bat company uses FIFO inventory method, So of 15,000 units sold, 14,000 units are from above given details and remaining 1,000 units are from the ones bought on September 15 @ $5.5 per unit. So the units left with the company are 5,000 units of $5.5 per unit, so the value of closing inventory is 5000 units * $5.50 per unit = $ 27,500.