A firm that uses a periodic inventory system sells a single product that had a beginning inventory of 5,000 units with a total cost of $35,000. Early in the year, 12,000 units were purchased at $9 each and 4,000 units were on hand at the end of the year. Using FIFO, what is the amount of Cost of Goods Sold?

Question

Quizplus · Accepted Answer

Using FIFO method, we assume that the units sold are the ones that were purchased first, and then we move to the more recent purchases.

So, the cost of goods sold will be calculated as follows:

Beginning inventory: 5,000 units x $7 per unit = $35,000 
Purchase on early in the year: 5,000 units x $9 per unit = $45,000 
Purchase later in the year: 12,000 units x $9 per unit = $108,000 
Total cost of goods available for sale: $188,000

Cost of goods sold = (units sold x cost per unit) 
= (5,000 units x $7 per unit) + (7,000 units x $9 per unit) 
= $35,000 + $63,000 
= $98,000

Therefore, the answer is (C) $107,000.

A Firm That Uses a Periodic Inventory System Sells a Single