What is the Cost of Goods Sold for the Mar 31 st sale under FIFO inventory costing?

Mar 1st beginning inventory 5 units at $30 per unit

Mar 3rd sold 3 units

Mar 6th purchased inventory 30 units at $40 per unit

Mar 17th sold 20 units

Mar 23rd purchased inventory 25 units at $50 per unit

Mar 31st sold 30 units

Required: Use the information above to answer the questions below for First In First Out (FIFO) and Moving Weighted Average (MWA) inventory costing methods.

ROUND ALL ANSWERS TO 2 DECIMAL PLACES

What is the Cost of Goods Sold for the Mar 31 st sale under FIFO inventory costing?

Solutions

Expert Solution

Under the FIFO method, the earliest goods purchased are the first ones removed from the inventory account. The goods that are purchased earlier are removed first under FIFO.

In the given situation, total sales in units = 3 units + 20 units + 30 units = 53 units.

Under FIFO firstly the 5 units from opening inventory will be sold, then 30 units purchased on March 6 will be sold and the balance units i.e. 18 units (53 units - 30 units -5 units) will be sold from the purchase on March 23.

Hence, the cost of goods sold = Cost of goods of 5 units from opening inventory + Cost of goods of 30 units from purchase on March 6 + Cost of goods of 18 units from purchase on March 23

Cost of goods of 5 units from opening inventory = 5 units * $30 = $150

Cost of goods of 30 units from purchase on March 6 = 30 units * $40 = $1200

Cost of goods of 18 units from purchase on March 23 = 18 units * $50 = $900

Hence, the cost of goods sold under FIFO = $150 + $1200 + $900 = $2,250

ekkarill92 answered 1 year ago

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