Question

During 2014, Walden Toys Plc., which began business in October of that year, purchased 20,000 units of a toy at a cost of 21 euros per unit in October. The toy sold well in October. In anticipation of heavy December sales, Walden purchased 6,000 additional units in November at a cost of 22 euros per unit. During 2014, Accent sold 23,000 unites at a price of 35 euros per unit. Under the first in, first out (FIFO) method, what is Walden’s cost of goods sold for 2014?

Answer 1

Under first - in-first out method, units bought first are sold first. So, in this case 23000 units sold are from first 20000 units from october stock and balance 3000 units from November bought stock.

So, Cost of goods sold

=

(20000*21)+(3000*22)

=

€        4,86,000

So, Under First-in-First out method, Cost of goods sold is 486,000 euros.