Vargas Company uses the perpetual inventory system and the FIFO cost flow method. During the current year, Vargas purchased 1,300 units of inventory that cost $14 each. At a later dateduring the year, the company purchased an additional 1,700 units of inventory that cost $15 each. Vargas sold 1,400 units of inventory for $18.What is the amount of cost of goods sold that will appear on the current year's income statement?
A)$5,500
B)$18,200
C)$4,200
D)$19,700

Question

Quizplus · Accepted Answer

Using the FIFO cost flow method, we assume that the first units purchased are the first ones sold. Therefore, the cost of goods sold will be calculated based on the cost of the 1,300 units purchased at $14 each, plus 100 of the 1,700 units purchased at $15 each (since we only sold 1,400 units), which gives us a total cost of $19,700.

Vargas Company Uses the Perpetual Inventory System and the FIFO