Question

The Stevens Co. had beginning inventory (1/1/10 of 8 units at $100, purchased 10 units of inventory at $120 on 3/1/10, and another 12 units at $110 on 5/1/10 Ending inventory consisted of 14 units. Use this information to answer the following question: What is the cost of the cost of goods sold under FIFO

Answer 1

The Stevens Co.

The cost of goods sold under FIFO is:

$1,760.

Step-by-step explanation:

a) Data and Calculations:

1/1/10 Beginning inventory 8 units at $100 = $800

3/1/10 Purchases 10 units at $120 = $1,200

5/1/10 Purchases 12 units at $110 = $1,320

Total Goods available 30 units $3,320

Ending inventory 14 units

Units sold 16

Under FIFO:

Ending inventory

5/1/10 Purchases 12 units at $110 = $1,320

3/1/10 Purchases 2 units at $120 = $240

Total value of ending inventory = $1,560

Cost of goods sold = cost of goods available for sale minus the cost of ending inventory

= $1,760 ($3,320 - 1,560)

or Cost of goods sold:

1/1/10 Beginning inventory 8 units at $100 = $800

3/1/10 Purchases 8 units at $120 = $960

Total value of cost of goods sold = $1,760

b) FIFO (FIrst-in, First-out) is a cost evaluation method that assumes that the first inventories recorded are the first to be sold. This implies that the cost of goods sold is determined from the earlier stock while the cost of the ending inventory is determined from the later stock.