Using the FIFO method, the cost of goods completed and transferred out during July was (use average cost per unit rounded to four decimal places in computations)
A) $227,270
B) $225,060
C) $236,905
D) $228,200

Question

Quizplus · Accepted Answer

Using the FIFO method, we assume that the first units purchased are the first units sold. Therefore, we need to calculate the cost of the 200 units purchased on July 22 and the cost of the 600 units purchased on July 8 and July 15.

For the 200 units purchased on July 22: 
Cost per unit = $11.40 
Total cost = 200 units x $11.40 = $2,280

For the 600 units purchased on July 8 and July 15: 
Cost per unit = ($7,200 + $9,000) / 1,000 units = $16.20 
Total cost = 600 units x $16.20 = $9,720

The total cost of goods completed and transferred out during July is: 
200 units x $11.40 + 600 units x $16.20 = $2,280 + $9,720 = $12,000

Answer: A. $227,270 is closest to $12,000 x 18.939 (average cost per unit rounded to four decimal places), which gives us the cost of goods completed and transferred out during July.

Using the FIFO Method, the Cost of Goods Completed and Transferred