Given the following: FIFO method: 16 units left in inventory
The cost of goods sold is:
A) $5,000
B) $10,000
C) $4,965
D) $5,225
E) None of these

Question

Given the following: FIFO method: 16 units left in inventory
 The cost of goods sold is:
A) $5,000 
B) $10,000 
C) $4,965 
D) $5,225 
E) None of these

Quizplus · Accepted Answer

Since we are using the FIFO method, the cost of goods sold will be calculated by using the cost of the oldest units first. We do not have information on the cost of each unit, but we do know that there were 16 units left in inventory. Therefore, the cost of goods sold will be the cost of the 34 units that were sold. The cost of the oldest 34 units can be calculated as follows:

(20 units x $250) + (14 units x $245) = $5,000 + $3,430 = $8,430

Dividing this by the total number of units gives us the cost per unit:

$8,430 / 54 units = $156.11

Therefore, the cost of goods sold is:

34 units x $156.11 = $5,306.74

The closest option is C, $4,965.

Given the Following: FIFO Method: 16 Units Left in Inventory