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Beginning Inventory consists of 4 items at $10 each. During the month, the company purchased 3 items for $11 each and it sold 3 items. Using first-in, first-out, Cost of Goods Sold equals ______.

Question

Beginning Inventory consists of 4 items at 10each.Duringthemonth,thecompanypurchased3itemsfor10 each. During the month, the company purchased 3 items for 11 each and it sold 3 items. Using first-in, first-out, Cost of Goods Sold equals ______.

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Solution

To calculate the Cost of Goods Sold (COGS) using the First-In, First-Out (FIFO) method, we follow these steps:

  1. Identify the cost of the oldest inventory: In this case, the beginning inventory consists of 4 items at 10each.So,thecostoftheoldestinventoryis4items∗10 each. So, the cost of the oldest inventory is 4 items * 10/item = $40.

  2. Determine the number of items sold: The company sold 3 items.

  3. Calculate the COGS: Since we are using the FIFO method, we sell the items in the order they were purchased. So, the first 3 items sold were from the beginning inventory. Therefore, the COGS is 3 items * 10/item=10/item = 30.

So, using the FIFO method, the Cost of Goods Sold equals $30.

This problem has been solved

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