A company uses the FIFO method for inventory valuation. If it has 100 units at $10 each and purchases 50 units at $12 each, what is the value of 80 units sold?
Practice Questions
1 question
Q1
A company uses the FIFO method for inventory valuation. If it has 100 units at $10 each and purchases 50 units at $12 each, what is the value of 80 units sold?
$1,000
$1,060
$1,080
$1,200
Value of 80 units sold = (100 units x $10) + (20 units x $12) = $1,000 + $240 = $1,080.
Questions & Step-by-step Solutions
1 item
Q
Q: A company uses the FIFO method for inventory valuation. If it has 100 units at $10 each and purchases 50 units at $12 each, what is the value of 80 units sold?
Solution: Value of 80 units sold = (100 units x $10) + (20 units x $12) = $1,000 + $240 = $1,080.
Steps: 6
Step 1: Identify the total units available for sale. The company has 100 units at $10 each and purchases 50 units at $12 each. So, total units = 100 + 50 = 150 units.
Step 2: Determine how many units are sold. The question states that 80 units are sold.
Step 3: Use the FIFO method (First In, First Out) to calculate the value of the sold units. This means we sell the oldest inventory first.
Step 4: Calculate the value of the first 80 units sold. Since there are 100 units at $10 each, we sell all 80 units from this batch.
Step 5: Calculate the value of the 80 units sold: 80 units x $10 = $800.
Step 6: Since we only sold from the first batch, we do not need to use the second batch of 50 units at $12 each.
