ECONOMICS

Detailed explanation-1: -According to the FIFO method, the first units are sold, and the calculation uses the newest units. So, the ending inventory would be 1, 500 x 10 = 15, 000 since $10 was the cost of the newest units purchased.

Detailed explanation-2: -Closing Stock Formula (Ending) = Opening Stock + Purchases – Cost of Goods Sold.

Detailed explanation-3: -Example of FIFO Imagine if a company purchased 100 items for $10 each, then later purchased 100 more items for $15 each. Then, the company sold 60 items. Under the FIFO method, the cost of goods sold for each of the 60 items is $10/unit because the first goods purchased are the first goods sold.

Detailed explanation-4: -In case of LIFO method, stock is issued for production on the basis of last in first out. It means the latest purchased stock is issued for production. In such case, closing stock valuation is done at a price which is paid for the earlier consignment.