Question

Oriole Company had the following inventory transactions occur during 2022:

Units

Cost/unit

Feb. 1, 2022

Purchase

121 $50
Mar. 14, 2022

Purchase

208 $53
May 1, 2022

Purchase

148 $55

The company sold 343 units at $71 each and has a tax rate of 30%. Assuming that a periodic inventory system is used, what is the company’s gross profit using FIFO?

a.$6509

b.$17844

c.$18475

d.$5878

Answer 1

$4,859

Step-by-step explanation:

Units Cost/unit Total

Feb. 1, 2022

Purchase 121 $50 $6,050

Mar. 14, 2022

Purchase 208 $53 $11,024

May 1, 2022

Purchase 148 $55 $8,140

total 447 $25,214

ending inventory 104 $5,720

COGS $19,494

under FIFO, the cost of goods sold (COGS) is calculated using the oldest units in stock:

units remaining in inventory = 447 - 343 = 104 x $55 = $5,720

COGS = $25,214 - $5,720 = $19,494

gross profit = total revenue - COGS

gross profit = (343 x $71) - $19,494 = $24,353 - $19,494 = $4,859