Question

Glasgow Enterprises started the period with 85 units in beginning inventory that cost $2.00 each. During the period, the company purchased inventory items as follows:

Purchase	No. of Items			Cost
1		350		$	2.50
2		125		$	2.60
3		50		$	3.00

Glasgow sold 375 units after purchase 3 for $8.10 each.

What is Glasgow's cost of goods sold under FIFO?

Answer 1

solution:

under FIFO method, inventory is issued in order of its purchase,

it means the invetory which comes first , goes first into production.

thats why it is called first in first out method.

calculation of cost of goods sold :

total units sold = 375

firstly the 85 units from the opening stock will be issued in production.

and the balance units ( 375 - 85 = 290 ) will be issued from the first purchase.

cost of goods sold will be:

=( units of opening stock * rate per unit ) + (units issued from first purchase * rate per unit )

= ( 85 * 2 ) + ( 290 * 2.5 )

= 170 + 725

= $ 895

answer : cost of goods sold using FIFO is $ 895.

finish.