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If a company has 100 units of inventory purchased at $10 each and 50 units purch

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Question: If a company has 100 units of inventory purchased at $10 each and 50 units purchased at $15 each, what is the value of inventory under FIFO if 75 units are sold?

Options:

  1. $1,000
  2. $1,125
  3. $1,250
  4. $1,500

Correct Answer: $1,125

Solution: 

Under FIFO, the first 75 units sold would be from the first purchase, totaling $1,000 (100 units at $10) + $125 (25 units at $15).

If a company has 100 units of inventory purchased at $10 each and 50 units purch

Practice Questions

Q1
If a company has 100 units of inventory purchased at $10 each and 50 units purchased at $15 each, what is the value of inventory under FIFO if 75 units are sold?
  1. $1,000
  2. $1,125
  3. $1,250
  4. $1,500

Questions & Step-by-Step Solutions

If a company has 100 units of inventory purchased at $10 each and 50 units purchased at $15 each, what is the value of inventory under FIFO if 75 units are sold?
  • Step 1: Identify the total inventory. The company has 100 units purchased at $10 each and 50 units purchased at $15 each.
  • Step 2: Calculate the total number of units available for sale. This is 100 units + 50 units = 150 units.
  • Step 3: Understand the FIFO method. FIFO stands for 'First In, First Out', meaning the first items purchased are the first ones sold.
  • Step 4: Determine how many units are sold. In this case, 75 units are sold.
  • Step 5: Sell the first 100 units at $10 each. Since only 75 units are sold, all of these will come from the first purchase.
  • Step 6: Calculate the total cost of the first 75 units sold. This is 75 units x $10 = $750.
  • Step 7: Since all 75 units sold are from the first purchase, there are no units sold from the second purchase at $15.
  • Step 8: The value of the remaining inventory is calculated by subtracting the sold units from the total inventory.
  • FIFO (First-In, First-Out) – FIFO is an inventory valuation method where the oldest inventory items are sold first.
  • Inventory Valuation – Understanding how to calculate the value of inventory based on the cost of goods sold.
  • Cost Allocation – Allocating costs to sold and remaining inventory based on purchase order.
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