The Laurel Corporation starts the year with a beginning inventory of 600 units at $5 per unit.The company purchases 1,000 units at $4 each in February and 400 units at $6 each in October.Laurel sells 300 units during the year.Laurel has a periodic inventory system and uses the FIFO inventory costing method.What is the amount of cost of goods sold?
A)$1,200
B)$1,868
C)$1,500
D)$1,800

Question

Quizplus · Accepted Answer

First-in,first-out (FIFO)assumes that the costs of the first goods purchased (first in)are the costs of the first goods sold (first out).As such,since 600 units were in the beginning inventory and the company only sold 300 during the period,we use the $5 per unit cost of the beginning inventory units to calculate cost of goods sold.
Cost of goods sold = 300 units × $5 per unit = $1,500

The Laurel Corporation Starts the Year with a Beginning Inventory