A company just starting in business purchased three merchandise inventory items at the following prices.March 2, $150; March 7, $160; and March 15, $180.If the company sold two units for $250 each on March 10 and March 20, and used the FIFO cost formula in a perpetual inventory system, the gross profit for March would be
A)$200.
B)$190.
C)$180.
D)$150.

Question

Quizplus · Accepted Answer

Under FIFO, the first items purchased are the first to be sold. The cost of goods sold for the two units sold would be $150 (March 2) + $160 (March 7) = $310. The sales revenue is $250 + $250 = $500. Therefore, the gross profit is $500 - $310 = $190.

A Company Just Starting in Business Purchased Three Merchandise Inventory