policies\ncurrent attempt in progress\nhudson company started its year with 600 units of beginning inventory…

policies\ncurrent attempt in progress\nhudson company started its year with 600 units of beginning inventory at a cost of $4 per unit. during the year, the company made\nthe following purchases: may, 900 units at $5 per unit and july, 500 units at $6 per unit. a physical count of inventory at year - end\nindicates that there are 700 units in ending inventory. what is the cost of the ending inventory if hudson company uses the fifo\nmethod for valuing inventory?\n$3,465\n$4,000\n$5,900\n$2,900

policies\ncurrent attempt in progress\nhudson company started its year with 600 units of beginning inventory at a cost of $4 per unit. during the year, the company made\nthe following purchases: may, 900 units at $5 per unit and july, 500 units at $6 per unit. a physical count of inventory at year - end\nindicates that there are 700 units in ending inventory. what is the cost of the ending inventory if hudson company uses the fifo\nmethod for valuing inventory?\n$3,465\n$4,000\n$5,900\n$2,900

Answer

Explanation:

Step1: Calculate units from July purchase

Under FIFO (First - In - First - Out), we assume the oldest units are sold first. The company has 700 units in ending inventory. The July purchase has 500 units. So, all 500 units from July ($6 per unit) are part of ending inventory.

Step2: Calculate remaining units from May purchase

We need (700 - 500=200) more units for ending inventory. These 200 units come from the May purchase (which is the next - oldest inventory after the beginning inventory, but since we are calculating ending inventory under FIFO, and beginning inventory is assumed to be sold first). The May purchase cost is $5 per unit.

Step3: Calculate cost of ending inventory

The cost of ending inventory is ((500\times6)+(200\times5)) [ \begin{align*} &(500\times6)+(200\times5)\ =&3000 + 1000\ =&4000 \end{align*} ]

Answer:

$4,000