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A company uses the FIFO method for inventory valuation. If it has 100 units at $

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Question: 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?

Options:

  1. $1,000
  2. $1,060
  3. $1,080
  4. $1,200

Correct Answer: $1,080

Solution: 

Value of 80 units sold = (100 units x $10) + (20 units x $12) = $1,000 + $240 = $1,080.

A company uses the FIFO method for inventory valuation. If it has 100 units at $

Practice Questions

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. $1,000
  2. $1,060
  3. $1,080
  4. $1,200

Questions & Step-by-Step Solutions

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?
  • 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.
  • FIFO Method – FIFO (First In, First Out) is an inventory valuation method where the oldest inventory items are sold first.
  • Inventory Valuation – Calculating the value of inventory sold based on the cost of the items in stock.
  • Cost of Goods Sold (COGS) – The total cost of producing goods that were sold during a specific period.
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