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Alphabet Company, which uses the periodic inventory method, purchases different letters for resale. Alphabet had no beginning inventory. It purchased A thru G in January at $10.50 per letter. In February, it purchased H thru L at $12.50 per letter. It purchased M thru R in March at $13.50 per letter. It sold A, D, E, H, J and N in October. There were no additional purchases or sales during the remainder of the year.Use the information above to answer the following question. If Alphabet Company uses the FIFO method, what is the cost of its ending inventory?a. $24b. $42c. $58d. $76

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Answer: $154.00

Explanation:

If the company is using FIFO, they would have sold off the earliest purchases first. As the sold 6 letters in October, the letter left from the first purchase is:

A to G = 7 letter

= 7 - 6

= 1 letter

Remaining inventory = 1 letter at $10.50

H - L = 5 letter

= 5 * 12.50 = $62.50

M through to R = 6 letter

= 6 * 13.50

= $81

Total ending inventory = 10.50 + 62.50 + 81

= $154.00

Note: Options are most likely for a variant of this question.

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