A Hardware Merchant Using the FIFO Method of Valuing Inventory

question 58

Short Answer

A hardware merchant using the FIFO method of valuing inventory has 300 hammers remaining in inventory. The merchant purchased hammers over a three month-period as follows: 120 purchased at $3.50 on April 1, 150 purchased at $3.62 on May 1, and 150 purchased at $3.72 on June 1. Compute the value of the ending inventory of hammers at FIFO cost.​

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Definitions:

Target Costing

A pricing strategy in which the selling price of a product is determined first, and then the allowable cost of manufacturing the product is calculated by subtracting a desired profit margin.

Cost-Reduction Emphasis

A strategic focus of an organization on identifying and implementing ways to decrease expenses and costs to improve profitability.

Differential Analysis

The process of comparing the costs and benefits of alternative decisions or investments to determine the best option.

Book Value

The value of an asset according to its balance sheet account balance, taking into account the cost of the asset minus any depreciation, amortization, or impairment costs.