Question

The inventory data for an item for November are: Nov. 1 4 10 17 30 Inventory Sold Purchased Sold Purchased 20 units at $19 10 units 30 units at $20 20 units 10 units at $21 Using a perpetual system, what is the cost of the goods sold for November if the company uses FIFO? O $580 O $600 $590 O $610

Answer 1

FIFO method assumes that first available or purchased units are sold out first. In the above case, the first sale of 10 units consists of units from beginning inventory.

Cost of goods sold for first sale = 10 units x $ 19

Cost of goods sold for first sale = $ 190.

Now the balance in beginning inventory = 10 units.

The second sale of 20 units consists of 10 units from beginning inventory and balance 10 units from first purchase.

Cost of goods sold for 2nd sale = ( 10 units x $ 19) + ( 10 units x $ 20)

Cost of goods sold for 2nd sale = $ 390

Total cost of goods sold = 190 + 390

Total cost of goods sold = $ 580.

Hence, option A is the correct answer.

SUMMARY:

Option A is the correct answer.