A company just starting in business purchased three merchandise inventory items at the following prices: first purchase $64; second purchase $76; and third purchase $68.If the company sold two units for a total of $200 and used FIFO costing, the gross profit for the period would be

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Quizplus · Accepted Answer

Under FIFO (First In, First Out) costing, the first items purchased are the first ones sold. Therefore, the cost of goods sold (COGS) would be the cost of the first two purchases: $64 (first purchase) + $76 (second purchase) = $140. The sales revenue is $200, so the gross profit is $200 - $140 = $60.

A Company Just Starting in Business Purchased Three Merchandise Inventory