Questions: Directions: Be sure to show your original work in its fullest expression for partial credit (when applicable). Problems 1 – 3. Scenario: Crimson Sky, a company that you are consulting with, specializing in red light therapy devices, holds 30 devices in inventory. The devices were purchased in four different batches at different price points. Purchase Information: Batch 1: 5 devices purchased at 14,000 each Batch 2: 10 devices purchased at 15,000 each Batch 3: 10 devices purchased at 16,000 each Batch 4: 5 devices purchased at 17,000 each The company sells 12 devices. Calculate the value of the remaining inventory using the FIFO, LIFO and Weighted Average methods.

Directions: Be sure to show your original work in its fullest expression for partial credit (when applicable). Problems 1 – 3. Scenario: Crimson Sky, a company that you are consulting with, specializing in red light therapy devices, holds 30 devices in inventory. The devices were purchased in four different batches at different price points. Purchase Information: Batch 1: 5 devices purchased at 14,000 each Batch 2: 10 devices purchased at 15,000 each Batch 3: 10 devices purchased at 16,000 each Batch 4: 5 devices purchased at 17,000 each The company sells 12 devices. Calculate the value of the remaining inventory using the FIFO, LIFO and Weighted Average methods.

Solution

To calculate the value of the remaining inventory using the FIFO (First-In, First-Out), LIFO (Last-In, First-Out), and Weighted Average methods, we need to follow these steps:

1. FIFO (First-In, First-Out) Method

Under the FIFO method, the oldest inventory costs are used up first when items are sold. Therefore, we will sell the devices from the earliest batches first.

Inventory before sale:

Batch 1: 5 devices at $14,000 each
Batch 2: 10 devices at $15,000 each
Batch 3: 10 devices at $16,000 each
Batch 4: 5 devices at $17,000 each

Devices sold: 12

Devices sold from:

Batch 1: 5 devices at $14,000 each = $70,000
Batch 2: 7 devices at $15,000 each = $105,000

Remaining inventory:

Batch 2: 3 devices at $15,000 each = $45,000
Batch 3: 10 devices at $16,000 each = $160,000
Batch 4: 5 devices at $17,000 each = $85,000

Total value of remaining inventory (FIFO):
$45,000 + $160,000 + $85,000 = $290,000

2. LIFO (Last-In, First-Out) Method

Under the LIFO method, the most recent inventory costs are used up first when items are sold. Therefore, we will sell the devices from the latest batches first.

Devices sold: 12

Devices sold from: