A company had beginning inventory of 10 units at a cost of 2

A company had beginning inventory of 10 units at a cost of $22 each on March 1. On March 2, it purchased 10 units at $38 each. On March 6 it purchased 6 units at $27 each. On March 8, it sold 22 units for $70 each. Using the FIFO perpetual inventory method, what was the cost of the 22 units sold?

Solution

As per FIFO\';Cost of units sold=(10 units@$22 each)+(10 units@$38 each)+(2 units@$27 each)

which is equal to

=$654.

As per FIFO;goods purchased first are sold off first.Hence 22 units sold would consist of 10 units of beginning inventory;10 units of March 2 purchases and the balance =(22-10-10)=2 units of March 6 purchases.