Brocken Co. has the following data related to an item of inventory: The value assigned to cost of goods sold if Brocken uses FIFO is
A) £33,800.
B) £33,920.
C) £34,138.
D) £34,164.

Question

Brocken Co. has the following data related to an item of inventory:  The value assigned to cost of goods sold if Brocken uses FIFO is
A) £33,800. 
B) £33,920. 
C) £34,138. 
D) £34,164.

Quizplus · Accepted Answer

To calculate cost of goods sold using FIFO, we must assume that the first items purchased are the first ones sold. Therefore:

- 200 units were purchased at £160 per unit on 1/1
- 300 units were purchased at £170 per unit on 2/15 
- 100 units were purchased at £180 per unit on 4/1 
- 50 units were purchased at £185 per unit on 5/15

We can calculate the cost of goods sold by adding up the cost of the units sold:

- 100 units were sold on 4/15 for £22,000 (100 x £220) 
- 400 units were sold on 6/1 for £74,920 (200 x £160 + 200 x £170)

The total cost of goods sold is £96,920 (£22,000 + £74,920).