- CFA Exams
- CFA Level I Exam
- Topic 3. Financial Statement Analysis
- Learning Module 22. Inventories
- Subject 2. Inventory Valuation Methods
CFA Practice Question
Greenbelt Processors had a beginning inventory of 798 units valued at a cost of $34,895. It purchased 4,474 units of new inventory worth $195,402 during the year. A year-end audit revealed that it had 853 units on hand.
If Greenbelt uses the FIFO method, what is its COGS for the year?
A. $193,000
B. $193,042
C. $193,027
Explanation: Since Greenbelt has 853 units on hand at year-end, under FIFO they all belong to purchases made during the year.
Ending inventory = 853 x 43.675 = 37,255
COGS = BI + Purchases - EI = 34,895 + 195,402 - 37,255 = 193,042
Unit price of purchases = 195,402 / 4,474 = 43.675
Ending inventory = 853 x 43.675 = 37,255
COGS = BI + Purchases - EI = 34,895 + 195,402 - 37,255 = 193,042
User Contributed Comments 2
| User | Comment |
|---|---|
| Indira | 798+4474-853=4419 units - inventory sold 4419 units consist of 798 @ 43.728 and 3621(4419-798) @ 43.675 = 34,895 + 158,147 = 193,042 |
| Aoprita | Indira, your explanation is much better than the one provided. Thank you. |