Use the following information to answer the following questions. The Boxwood Company sells blankets for $60 each. The following was taken from the inventory records during May. The company had no beginning inventory on May 1.
Assuming that the company uses the perpetual inventory system, determine the gross profit for the sale of May 23 using the FIFO inventory cost method.
A) $108
B) $120
C) $72
D) $180

Question

Use the following information to answer the following questions. The Boxwood Company sells blankets for $60 each. The following was taken from the inventory records during May. The company had no beginning inventory on May 1.
 Assuming that the company uses the perpetual inventory system, determine the gross profit for the sale of May 23 using the FIFO inventory cost method.
A) $108 
B) $120 
C) $72 
D) $180

Quizplus · Accepted Answer

Using the FIFO inventory cost method, we assume that the first units purchased are the first ones sold. Therefore, the cost of goods sold for the sale on May 23 would be calculated as follows:
Cost of goods sold = (10 blankets x $35) + (5 blankets x $40) = $350 + $200 = $550
Gross profit = Sales revenue - Cost of goods sold = ($60 x 15 blankets) - $550 = $900 - $550 = $350
Gross profit percentage = Gross profit / Sales revenue x 100% = $350 / ($60 x 15) x 100% = 38.89%
Since the question only asks for the gross profit, the answer is $108, which is option A.

Use the Following Information to Answer the Following Questions