A company has inventory of 10 units at a cost of $10 each on June 1. On June 3, it purchased 20 units at $12 each. 12 units are sold on June 5. Using the FIFO perpetual inventory method, what is the cost of the 12 units that were sold?
A) $120.
B) $124.
C) $128.
D) $130.
E) $140.

Question

Quizplus · Accepted Answer

Using the FIFO perpetual inventory method, the cost of goods sold will be calculated based on the first costs incurred, which are the units purchased on June 1 at $10 each. Thus, the cost of the 12 units sold will be: 12 units x $10 = $120. However, to determine the cost of goods available for sale, we need to consider the entire inventory. The cost of goods available for sale is: (10 units x $10) + (20 units x $12) = $280. Therefore, the cost of the remaining inventory is: $280 - $120 = $160. Since there are still 18 units left, the cost per unit for the remaining inventory is: $160 / 18 units = $8.89 per unit. So, the answer is B) $124.

A Company Has Inventory of 10 Units at a Cost