Question

A company had beginning inventory of 3 units that cost $5 each. During the month, 17 units were purchased for $6 each. The company sold 15 units during the month and had 5 remaining in ending inventory. If the company uses FIFO instead of LIFO to calculate cost of goods sold, then cost of goods sold will be:

Answer 1

Cost of goods sold=$75

Step-by-step explanation:

FIFO is an abbreviation for the phrase (First in, First out). It is a method of calculating the cost of goods sold (COGS) by using the price of the oldest inventory.

LIFO is an abbreviation for the phrase (Last in, First out). It is a method of calculating the cost of goods sold (COGS) by using the price of the newest inventory

An inventory is the cost of a purchased product with the intention of reselling.

Consider the inventories arranged from oldest to newest as follows;

1. 3 units that cost $5 each

2. 17 units that cost $6 each

Cost of goods sold can be expressed as;

Cost of goods sold=Number of units sold×cost per unit

where;

Number of units sold=15 units

cost per unit=price of oldest inventory=$5

replacing in the expression above;

Cost of goods sold=(15×5)=$75

Cost of goods sold=$75