To determine the cost of goods sold (COGS) on October 24 and the inventory on October 31 using the first-in, first-out (FIFO) method, we need to follow these steps:
1. Calculate the cost of the goods sold on October 24 using the FIFO method.
2. Calculate the inventory on October 31 using the FIFO method.
Given the data, let's perform the calculations step by step.
Step 1: Calculate the cost of goods sold on October 24 using the FIFO method:
1. The first sale on October 7 of 180 units is from the October 1 inventory.
2. The second sale on October 24 of 150 units is from the remaining inventory after the October 15 purchase.
COGS for the October 7 sale: 180 units * $40 (from October 1 inventory) = $7200
Remaining inventory after the October 15 purchase: 200 units (from the October 15 purchase) - 180 units (sold on October 7) = 20 units
COGS for the October 24 sale: 20 units * $45 (from the October 15 purchase) + 130 units * $40 (remaining from October 1 inventory) = $900 + $5200 = $6100
Step 2: Calculate the inventory on October 31 using the FIFO method:
The remaining 50 units from the October 15 purchase and the entire October 1 inventory of 200 units are left. Calculate the value of these units:
50 units * $45 (from the October 15 purchase) + 200 units * $40 (from October 1 inventory) = $2250 + $8000 = $10250
Therefore, according to the first-in, first-out (FIFO) method:
(a) The cost of goods sold on October 24 is $6100.
(b) The inventory on October 31 is $10250.