Question

Panamerican Foods maintains an inventory of sweet cream they sell to their customer, the Cake Bakery. The customer uses sweet cream in their cake baking process. Panamerican starts the year with a beginning inventory of 470 gallons of cream at $22 per gallon. Panamerican Foods buys 585 gallons at $38 each in February and 540 gallons at $23 each in October. Panamerican sells 235 gallons during the year. Panamerican has a periodic inventory system and uses the FIFO inventory costing method. What is the amount of cost of goods sold?

Multiple Choice

• $5,170

• None of the other answers are correct.

• $5,405

• $5,439

• $8,930

Answer 1

Your required answer is option A i.e. $5,170

Explanation:

Since Panamerican is using periodic inventory system and uses FIFO method for inventory costing method which means the inventory purchased (existing) first will be sold first and therefore in the given case first of all inventory will be sold out of beginning inventory hence COGS will be:

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