A company just starting business made the following four inventory purchases in June: A physical count of merchandise inventory on June 30 reveals that there are 250 units on hand. Using the FIFO inventory method, the amount allocated to cost of goods sold for June is

Question

A company just starting business made the following four inventory purchases in June:  A physical count of merchandise inventory on June 30 reveals that there are 250 units on hand. Using the FIFO inventory method, the amount allocated to cost of goods sold for June is

Quizplus · Accepted Answer

FIFO (First-In-First-Out) method assumes that the first items purchased are the first items sold.

Calculation using FIFO method:

First purchase: 100 units x $5 = $500

Second purchase: 60 units x $6 = $360

Third purchase: 40 units x $8 = $320

Fourth purchase: 50 units x $9 = $450

Total cost of goods available for sale = $1,630

250 units sold:

100 units from the first purchase = $500

60 units from the second purchase = $360

40 units from the third purchase = $320

50 units from the fourth purchase = $450

Total cost of goods sold = $1,630

Cost of goods sold for June = $1,290 ($500 + $360 + $320 + $110)

Therefore, the best choice is option C.

A Company Just Starting Business Made the Following Four Inventory