If a company has four lots of products for sale, purchase 1 (earliest) for $17, purchase 2 (middle) for $15, purchase 3 (middle) for $12, and purchase 4 (latest) for $14, which cost would be assumed to be sold first using LIFO costing? A. $17 B. $15 C. $12 D. $14
If a company has four lots of products for sale, purchase 1 (earliest) for $17, purchase 2 (middle) for $15, purchase 3 (middle) for $12, and purchase 4 (latest) for $14, which cost would be assumed to be sold first using LIFO costing? A. $17 B. $15 C. $12 D. $14
If a company has four lots of products for sale, purchase 1 (earliest) for $17, purchase 2 (middle) for $15, purchase 3 (middle) for $12, and purchase 4 (latest) for $14, which cost would be assumed to be sold first using LIFO costing?
A. $17
B. $15
C. $12
D. $14
Expert Solution & Answer
To determine
To identify:
The cost to be allocated in case of LIFO.
Introduction:
Last In First Out is a method of evaluation of cost of goods sold. In this method, it is assumed that units purchased at last is sold first. Costs in relation with units sold are taken from cost of last lot and in case, the sold units is higher than the latest lot purchased, then cost of last second lot is used.
Answer to Problem 1MC
The correct answer is d.
Explanation of Solution
d.
In case of LIFO, cost of sold uints are taken from the last lot purchased. In case, all the units from the last lot have been sold then cost of second last stock is applied for sale units. Thus, goods costing $14 would assumed to be sold first. Therefore, option d is correct.
a.
$17, would have been used in case of FIFO. Therefore, option a is incorrect.
b.
$15 cannot be used, until fourth and third lots are sold. Therefore, option b is incorrect.
c.
$12 cannot be used, until fourth lot has been sold. Therefore, option c is incorrect.
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V
The debits to Work In Process-Roasting Department for Morning Brew Coffee Company for August, together with Information concerning production, are as follows:
Work in process, August 1, 700 pounds, 10% completed
*Direct materials (700 x $2.60)
Conversion (700 x 10% x $1.00)
Coffee beans added during August, 22,000 pounds
Conversion costs during August
Work in process, August 31, 1,100 pounds, 40% completed
Goods finished during August, 21,600 pounds
All direct materials are placed in process at the beginning of production.
a. Prepare a cost of production report, presenting the following computations:
1. Direct materials and conversion equivalent units of production for August
2. Direct materials and conversion costs per equivalent unit for August
3. Cost of goods finished during August
4. Cost of work in process at August 31
$1,890*
$1,820
70
$1,890
56,100
24,167
?
?
If an amount is zero, enter in "0". For the cost per equivalent unit, round your answer to the near st cent.
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