Pacific Company starts the year with a beginning inventory of 6,000 units at $5 per unit.The company purchases 10,000 units at $4 each in February and 4,000 units at $6 each in March.Pacific sells 3,000 units during this quarter.Pacific has a perpetual inventory system and uses the FIFO inventory costing method.What is the cost of goods sold for the quarter?

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 6,000 units were in the beginning inventory and we only sold 3,000 during the quarter,we use the $5 per unit cost of the beginning inventory units to calculate cost of goods sold.
Cost of goods sold = 3,000 units × $5 per unit = $15,000

Pacific Company Starts the Year with a Beginning Inventory of 6,000