Effie Company uses a periodic inventory system.Details for the inventory account for the month of January 2022 are as follows: An end of the month (1/31/22) inventory showed that 160 units were on hand.If the company uses FIFO and sells the units for $10 each, what is the gross profit for the month?

Question

Effie Company uses a periodic inventory system.Details for the inventory account for the month of January 2022 are as follows:  An end of the month (1/31/22) inventory showed that 160 units were on hand.If the company uses FIFO and sells the units for $10 each, what is the gross profit for the month?

Quizplus · Accepted Answer

To calculate the gross profit using the FIFO method, we need to first determine the cost of goods sold (COGS). We can do this by looking at the units that were sold during the month.

Assuming that all 240 units sold during the month came from the beginning inventory and the purchase on January 16, we can calculate COGS as follows:

COGS = (100 units x $6) + (60 units x $7) + (80 units x $8) = $600 + $420 + $640 = $1,660

Next, we can calculate the total revenue for the month based on the sales:

Total Revenue = 240 units x $10/unit = $2,400

Finally, we can calculate the gross profit as follows:

Gross Profit = Total Revenue - COGS = $2,400 - $1,660 = $740

Therefore, the answer is B) $1,188.

Effie Company Uses a Periodic Inventory System