The inventory data for an item for November are:

Nov. 1   Inventory      20 units at $19

          4   Sold             10 units

        10   Purchased     30 units at $20

        17   Sold             20 units

        30   Purchased     10 units at $21

Using a perpetual system, what is the cost of the merchandise sold for November if the company uses LIFO?

Question

The inventory data for an item for November are:

Nov.  1   Inventory      20 units at $19

4   Sold             10 units

10   Purchased     30 units at $20

17   Sold             20 units

30   Purchased     10 units at $21

Using a perpetual system, what is the cost of the merchandise sold for November if the company uses LIFO?

BlackTom AI · Accepted Answer

The problem asks for the cost of merchandise sold (COGS) in November under a perpetual system using LIFO.
First, restate the data and the options to have a clear reference: Beginning inventory on Nov 1 is 20 units at $19. A sale on Nov 4 reduces this. On Nov 10, 30 units are purchased at $20. A sale on Nov 17 reduces the inventory again. Finally, on Nov 30, 10 units are purchased at $21. The answer choices are: $600, $580, $610, or None of the other three.
Now evaluate each option by following the LIFO method step by step for each sale.
- For the Nov 4 sale of 10 units under LIFO, we take from the most recent inventory on hand, which is 20 units at $19 (the only stock available at that moment). So COGS for this sale is 10 × $19 = $190. Remaining inventory: 10 units at $19.
- After Nov 10, we purchase 30 units at $20. Inventory becomes 10 units at $19 and 30 units at $20.
- For the Nov 17 sale of 20 units, the LIFO approach uses the most recently acquired units first, i.e., the $20 batch. We take 20 units at $20, so COGS adds 20 × $20 = $400. Remaining inventory: 10 units at $19 and 10 units at $20.
- On Nov 30, we purchase 10 units at $21. Inventory now is 10 units at $19, 10 units at $20, and 10 units at $21.
- Total COGS for November under LIFO = $190 (Nov 4) + $400 (Nov 17) = $590.
With this calculation, each alternative can be evaluated:
- $600: This would imply a different allocation of costs to the two sales, but under LIFO the second sale used the $20 batch first, not the $19 batch, so $600 overstates the correct total. The $190 portion is fixed by the first sale, and the second sale contributes $400, totaling $590, not $600.
- $580: This would undercount by $10. It would require misallocating one of the sale costs, which does not align with the LIFO flow given the purchases and sales sequence.
- $610: This would overcount by $20 relative to the computed $590, suggesting an incorrect application of LIFO to the second sale or a misreading of the purchase costs.
- None of the other three: Since we have a consistent LIFO flow that yields $590, this option is incorrect because there is a valid calculated total.
In summary, by applying LIFO under a perpetual system to each sale in November, the cost assigned to the goods sold sums to $590, matching the first calculation path and contradicting the other options.

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The inventory data for an item for November are: Nov. 1 Inventory 20 units at $19 4 Sold 10 units 10 Purchased 30 units at $20 17 Sold 20 units 30 Purchased 10 units at $21 Using a perpetual system, what is the cost of the merchandise sold for November if the company uses LIFO?

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