Diaz Manufacturing bought raw materials on April 23, 2013 and also on July 2, 2013. Products produced in the months of May were sold in July. The company uses FIFO to value its inventory. According to the matching principle, the company's accountant should associate:

Question

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Under FIFO, the inventory acquired first is sold first. Therefore, the products sold in July would have been produced using the raw materials acquired in May (assuming a production time of one month). The raw materials acquired on April 23 would have been used to produce inventory that is still on hand at the end of the month. Therefore, the accountant should associate the cost of the April 23 raw materials with the inventory on hand at the end of July.

Diaz Manufacturing Bought Raw Materials on April 23, 2013 and Also