Question

ABC applies a periodic inventory system. The following information related to its merchandise inventory during the month of October 2019 is available:

Oct. 1	Inventory on hand	3,000 units; cost €6,10 each
9	Purchase	10,000 units; cost €5,5 each
15	Sale	9,000 units; for €13,0 each
17	Purchase	7,000 units; cost €5,0 each
23	Sale	8,000 units; for €11,0 each
31	Inventory on hand	3,000 units

The cost of goods sold reported in ABC’s October 2019 income statement under the First-in, First-out (FIFO) cost flow method, is:

Select one:

a. 162,500

b. 62,500

c. 108,300

d. 37,500

e. 93,300

Answer 1

1st sales occurs on 15th oct.

3,000 out of 9,000 will go from inventory as of oct 1

COGS = 3000 * 6.1 = 18,300

Rest 6,000 will go from inventory purchased on 9th oct

COGS = 6,000 * 5.5 = 33,000

Remaining inventory of 9th oct purchased = 10,000 - 6,000 = 4,000

Next sale is on 23rd oct.

4,000 will go from purchase of 9th oct

COGS = 4,000 * 5.5 = 22,000

Rest 4,000 will go from 17t oct purchase

COGS = 4,000 * 5 = 20,000

Total COGS = 18,300 + 33,000 + 22,000 + 20,000

Total COGS = 93,300