FIFO and LIFO Costs Under Perpetual Inventory System The following units of an item were available for sale during the year: Beginning inventory Sale First purchase Sale Second purchase Sale 49 units at $43 43 units at $67 28 units at $46 12 units at $68 15 units at $49 22 units at $70 The firm uses the perpetual inventory system, and there are 15 units of the item on hand at the end of the year. a. What is the total cost of the ending inventory according to FIFO? $ 735 b. What is the total cost of the ending inventory according to LIFO? 645 x Feedback Check My Work a. Note that this exercise uses the perpetual inventory system. FIFO means that the first units purchased are assumed to be the first to be sold. Therefore, ending inventory is made up of the most recent purchases. Think of your inventory in terms of "layers. The first sale comes from the oldest layer - beginning inventory. Is the remaining amount of the beginning inventory layer enough to satisfy the second sale? If not, the remaining amount of units sold should be taken from the first purchase layer. Any remainder from the first purchase will then be considered as the oldest goods to be used for the second sale. If the remainder from the first purchase is not enough to satisfy the third sale