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A company has the following inventory purchases: 50 units at $10, 100 units at $

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Question: A company has the following inventory purchases: 50 units at $10, 100 units at $12, and 150 units at $15. If it sells 200 units using FIFO, what is the cost of goods sold?

Options:

  1. $2,200
  2. $2,400
  3. $2,600
  4. $2,800

Correct Answer: $2,400

Solution: 

Under FIFO, the cost of goods sold for the first 200 units sold is (50 * $10) + (100 * $12) + (50 * $15) = $500 + $1,200 + $750 = $2,450.

A company has the following inventory purchases: 50 units at $10, 100 units at $

Practice Questions

Q1
A company has the following inventory purchases: 50 units at $10, 100 units at $12, and 150 units at $15. If it sells 200 units using FIFO, what is the cost of goods sold?
  1. $2,200
  2. $2,400
  3. $2,600
  4. $2,800

Questions & Step-by-Step Solutions

A company has the following inventory purchases: 50 units at $10, 100 units at $12, and 150 units at $15. If it sells 200 units using FIFO, what is the cost of goods sold?
  • Step 1: Identify the inventory purchases. The company has three purchases: 50 units at $10 each, 100 units at $12 each, and 150 units at $15 each.
  • Step 2: Understand FIFO (First In, First Out). This means the first items purchased are the first ones sold.
  • Step 3: Start selling the units. The company needs to sell 200 units.
  • Step 4: Sell the first 50 units from the first purchase. Cost = 50 units * $10 = $500.
  • Step 5: Sell the next 100 units from the second purchase. Cost = 100 units * $12 = $1,200.
  • Step 6: Now, we have sold 150 units (50 + 100). We need to sell 50 more units from the third purchase.
  • Step 7: Sell 50 units from the third purchase. Cost = 50 units * $15 = $750.
  • Step 8: Add up all the costs to find the total cost of goods sold. Total Cost = $500 + $1,200 + $750 = $2,450.
  • FIFO (First-In, First-Out) – FIFO is an inventory valuation method where the oldest inventory costs are used to calculate the cost of goods sold when items are sold.
  • Cost of Goods Sold (COGS) – COGS represents the direct costs attributable to the production of the goods sold by a company.
  • Inventory Valuation – Understanding how to value inventory based on different methods (FIFO, LIFO, etc.) is crucial for accurate financial reporting.
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