Final Answer:
Zora Hurston Lightbulbs employs the FIFO method, where the cost of goods sold is determined by the cost of the earliest inventory. For the sale of 128 energy-saving bulbs on June 30, this means the cost of goods sold is based on the earliest purchases. So, the correct option is c) The cost of goods sold is based on the earliest purchases.
Step-by-step explanation:
Zora Hurston Lightbulbs, etc. utilizes the FIFO (First In, First Out) method for inventory management. In this context, the cost of goods sold (COGS) is calculated based on the assumption that the earliest inventory items purchased are the first to be sold. This implies that the cost associated with the initial batch of energy-saving bulbs procured would be recognized first when determining the cost of goods sold.
Therefore, when 128 energy-saving bulbs were sold on June 30, the FIFO method mandates that the cost of goods sold reflects the expenses incurred in acquiring the earliest inventory, providing a systematic approach to tracking costs and revenue.
The FIFO method is particularly relevant in industries where product homogeneity prevails, as is often the case with standardized goods like lightbulbs. By associating the cost of goods sold with the earliest purchases, this method offers a logical and straightforward approach to accounting for the flow of inventory. This methodology is aligned with the chronological order of inventory acquisition, making it conceptually clear for businesses to assess their costs accurately.