Thank you so much, honestly, I never comment any videos but you are so good at explaining. In the beginning i never clicked on your videos because the thumbnail didn't seem interesting. I wish I had started watching your videos earlier.
Time Stamp 5:07- Your totals are mistyped. It should be 50 * $5.00 = $250. You have 250 * $5.00= $250. Otherwise, thank you for this video. It helped my understanding quite a bit.
Hello Emad! In the example, the beginning inventory in April is 400 units, that the company paid $2400 for in total, so $6 on average per unit by taking $2400 and dividing by 400. LIFO assumes that the newest inventory gets sold first (and taken into Cost Of Goods Sold). At the end of the month of April, there are 350 units left that the company paid $2050 for. If you divide $2050 by 350, you get $5.86 average per unit.
Similar answer as I gave to your question about the FIFO inventory value per unit going up to $6.14 over time. The company is buying the units at ever increasing prices in January, February and March. When they have 2400 units in stock at the end of March, the average inventory value is $6. Once you sell 50 units, that according to the LIFO method are assumed to come from the purchases made in March at $7 per unit, then as a result your average value per unit of the remaining inventory goes down. You now have more of the "cheap" inventory left, and (relatively) less of the "expensive" stuff.
Enjoyed this video? Then subscribe to the channel, and watch my FIFO vs LIFO video next: ua-cam.com/video/VickgxlajOM/v-deo.html
finally someone explains in the right way, thank you!
You're welcome! Great to hear that.
Thank you so much, honestly, I never comment any videos but you are so good at explaining. In the beginning i never clicked on your videos because the thumbnail didn't seem interesting. I wish I had started watching your videos earlier.
Thank you for the feedback and compliment! Welcome to the channel. :-)
You've the first channel I've found that explains accounting concepts perfectly! :)
Awesome, thank you! More useful accounting videos in this playlist: ua-cam.com/video/b93KBmcXanI/v-deo.html
Time Stamp 5:07- Your totals are mistyped. It should be 50 * $5.00 = $250. You have 250 * $5.00= $250. Otherwise, thank you for this video. It helped my understanding quite a bit.
Thank you for pointing that out!!! I had completely missed that. Happy to hear the video was helpful.
Easy to learning
Thank you, Sathiya! Nice to hear that. :-)
Hi,
How the average price in this example is going from 6 to 5.86 ??? According to what??!!!
Hello Emad! In the example, the beginning inventory in April is 400 units, that the company paid $2400 for in total, so $6 on average per unit by taking $2400 and dividing by 400. LIFO assumes that the newest inventory gets sold first (and taken into Cost Of Goods Sold). At the end of the month of April, there are 350 units left that the company paid $2050 for. If you divide $2050 by 350, you get $5.86 average per unit.
2:40 how come the total dollars is $5.86? Shouldn't it be the same 6?(average?)
Similar answer as I gave to your question about the FIFO inventory value per unit going up to $6.14 over time. The company is buying the units at ever increasing prices in January, February and March. When they have 2400 units in stock at the end of March, the average inventory value is $6. Once you sell 50 units, that according to the LIFO method are assumed to come from the purchases made in March at $7 per unit, then as a result your average value per unit of the remaining inventory goes down. You now have more of the "cheap" inventory left, and (relatively) less of the "expensive" stuff.
Which chapter this topic..???
Hi Ekta! Real life has no chapters. 😉
I want a giraffe
We will be diversifying soon to offer elephants and tigers as well, which will increase the complexity of the cost accounting. ;-)