Question

After the sale on June 14, what is Red Rover's cost of the merchandise inventory on hand, assuming that Red Rover uses LIFO? (Reference Question 7 information.)

A. $510
B. $578
C. $900
D. $2,400

Answer 1

To calculate the cost of merchandise inventory on hand using LIFO method, we consider the cost of the most recent purchases. In this case, the most recent purchase was on June 12 for $800. Since Red Rover uses LIFO, the cost of the 2 units sold on June 14 would be $1600.

Step-by-step explanation:

To calculate the cost of merchandise inventory on hand, assuming that Red Rover uses LIFO (Last In, First Out) method, we need to determine the cost of the most recent purchases first. According to question 7 information, the most recent purchase was made on June 12 for $800.

The sale on June 14 would have reduced the inventory by 2 units. Since Red Rover uses LIFO, the cost of the two units sold would be equal to the cost of the most recent purchases. Therefore, the cost of the merchandise inventory on hand would be 2 x $800 = $1600.