A company just starting in business purchased three inventory items at the following prices. First purchase $80; Second purchase $95; Third purchase $85. If the company sold two units for a total of $260 and used FIFO costing, the gross profit for the period would be
A) $85.
B) $95.
C) $80.
D) $70.

Question

Quizplus · Accepted Answer

Under FIFO (First-In, First-Out) costing, the first two items purchased ($80 and $95) are considered sold. The cost of goods sold is $175 ($80 + $95). The sales revenue is $260, so the gross profit is $260 - $175 = $85.

A Company Just Starting in Business Purchased Three Inventory Items