Question

The Boxwood Company sells blankets for $30 each. The following was taken from the inventory records during May. The company had no beginning inventory on May 1.

Date	Blankets	Units	Cost
May 3	Purchase	23	$12
10	Sale	9
17	Purchase	32	$14
20	Sale	16
23	Sale	4
30	Purchase	24	$15

Assuming that the company uses the perpetual inventory system, determine the gross profit for the sale of May 23 using the FIFO inventory cost method.

a.$64

b.$168

c.$56

d.$196

Answer 1

a) $64

Inventory Valuation under FIFO Method

Date	Receipt or sales	Units	Rate per unit	Closing Balance
May 3	Receipt	23	$12	23 units @$12 per unit
May 10	Sales	9	$12	14 units @$12 per unit
May 17	Receipt	32	$14	14 units @$12 per unit 32 units @$14 per unit
May 20	Sales	14 2	$12 $14	30 units @$14 per unit
May 23	Sales	4	$14	26 units @$14 per unit
May 30	Receipts	24	$15	26 units @$14 per unit 24 units @$15 per unit

Calculation of Gross profit on sale of May 23

Cost of units sold on May 23 = 4 units @$14 per unit

= $56

Selling price per unit= $30

Gross profit for sale of May 23 = Sales- Cost of Goods sold

= (4 units*$30) - $56

= $120 - $56

= $64