Question

a company just starting in business purchased three merchandise inventory items at the following prices. march 2, $150; march 7, $160; and march 15, $180. if the company sold two units for $250 each on march 10 and used the fifo cost formula in a perpetual inventory system, the gross profit for march would be: a. $200. b. $190. c. $180. d. $150.

Answer 1

Using FIFO in a perpetual inventory system, the gross profit for March would be calculated by subtracting the cost of goods sold ($310) from the total sales revenue ($500), which gives a gross profit of $190.

Step-by-step explanation:

In a perpetual inventory system using the FIFO cost formula, when the company sold two units on March 10, they would have sold the units that were purchased first. Therefore, the cost of the goods sold would be based on the March 2 and March 7 purchase prices of $150 and $160, respectively.

The company sold each unit for $250, and since two units were sold, total sales revenue is $500 ($250 x 2). The cost of goods sold (COGS) is the sum of the prices of the first and second units: $150 + $160 = $310. To calculate the gross profit for March, we subtract the COGS from the sales revenue: $500 - $310 = $190.

herefore, the correct answer is b. $190.