Inventory records for Eliza Company revealed the following: Date Transaction Number of Units Unit CostMarch 1 Beginning Inventory 940 $ 7.11March 10 Purchase 600 7.54March 16 Purchase 710 7.97March 23 Purchase 550 8.37Eliza sold 1,870 units of inventory during the month. Cost of goods sold assuming FIFO would be: (Do not round your intermediate calculations. Round your answer to the nearest dollar amount.)Multiple Choice$14,687.$13,837.$15,652.$14,857.
Question
Inventory records for Eliza Company revealed the following: Date Transaction Number of Units Unit CostMarch 1 Beginning Inventory 940 14,687.15,652.$14,857.
Solution
The FIFO (First-In, First-Out) method assumes that the first goods purchased are the first ones to be sold. So, we calculate the cost of goods sold (COGS) based on the oldest prices.
Here's how we calculate it:
- First, we sell the 940 units from the beginning inventory: 940 units * 6,683.40
- Then, we sell 600 units from the March 10 purchase: 600 units * 4,524.00
- We still need to account for 330 units (1870 units sold - 940 units - 600 units = 330 units). These come from the March 16 purchase: 330 units * 2,629.10
Adding these amounts together, we get the total cost of goods sold (COGS): 4,524.00 + 13,836.50
So, the cost of goods sold assuming FIFO would be approximately $13,837 when rounded to the nearest dollar amount.
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