Question

The Boxwood Company els ankets for $37.00 each. The following was taken from the inventory records during May. The company had no beginning inventory on May 1 Date Blankats Units May 03 Purchase 11 $16.00 May 10 Sale May 30 Purchase 23 $19.00 Assuming that the company uses the perpetual inventory system, determine the grow profit for the sale of May 23 using the FIFO inventory costat Select the correct answer, 575

Answer 1

FIFO method means First in first out , which means the units purchased first, sold first. Under this method, Cost of goods sold is calculated using the cost price of units purchased first which means cost of 12 units, using the cost price of $16.00, cost of 16 units using the cost price of both $16.00 and $18.00 and so on..

Gross profit for the units sold on May 23

Cost of good sold for the units sold on May 23 = (3 units * $16.00) + (5 units * $18.00)

= $48.00 + $90.00

= $138

Sales on May 23 = Units * Selling price

= 8 units * $37.00

= $296

Gross profit for the units sold on May 23 = Sales - Cost of goods sold

= $296 - $138

= $158

Therefore $158 is the correct answer.