A company has inventory of 10 units at a cost of $10 each on June 1. On June 3, they purchased 20 units at $12 each. 12 units are sold on June 5. Using the FIFO perpetual inventory method, what is the cost of the 12 units that were sold?
A)$120
B)$124
C)$128
D)$130
E)$140

Question

Quizplus · Accepted Answer

According to the FIFO method, the cost of the items sold is based on the cost of the oldest (first-in) items in inventory. Therefore, the cost of the 12 units sold would be calculated as follows:

- The first 10 units sold would come from the inventory purchased on June 1, at a cost of $10 each, for a total of $100.
- The next 2 units sold would come from the remaining inventory purchased on June 3, at a cost of $12 each, for a total of $24.

Therefore, the total cost of the 12 units sold would be $100 + $24 = $124, which is option B.

A Company Has Inventory of 10 Units at a Cost