The following information should be used to answer questions 5 to 10 inclusive
An inventory ledger card shows the following details:
June 1 50 units in inventory at £20 per unit.
June 7 100 units purchased at a cost of £22.50
June 14 80 units sold at £48.00
June 21 50 units purchased at a cost of £25 per unit
June 22 60 units sold at £51.00
-What is the profit for the month of June, assuming the FIFO method of inventory valuation is used (to the nearest pound)?

Question

Quizplus · Accepted Answer

To calculate the profit for June using the FIFO method, we first determine the cost of goods sold (COGS) and then subtract it from the sales revenue.1. Calculate COGS:- For the first 80 units sold on June 14, 50 units are from the June 1 inventory (£20 each) and 30 units from the June 7 purchase (£22.50 each).  COGS for June 14 = (50 units * £20) + (30 units * £22.50) = £1,000 + £675 = £1,675- For the 60 units sold on June 22, 70 units from the June 7 purchase are still available, so all 60 units are taken from this batch.  COGS for June 22 = 60 units * £22.50 = £1,350- Total COGS = £1,675 + £1,350 = £3,0252. Calculate Sales Revenue:- Revenue from June 14 sale = 80 units * £48 = £3,840- Revenue from June 22 sale = 60 units * £51 = £3,060- Total Revenue = £3,840 + £3,060 = £6,9003. Calculate Profit:- Profit = Total Revenue - COGS = £6,900 - £3,025 = £3,875Therefore, the profit for the month of June, using the FIFO method, is £3,875.

The Following Information Should Be Used to Answer Questions 5