patrica is a business owner who is trying to determine her cost of goods sold for 2012. shoe bought 20 units of inventory at $11, then 26 units at $9 and finally 18 units at $14. she sold 30 units in 2012 and uses the fifo for her inventory valuation. what was her cost of goods sold in 2012, assuming that there was no inventory at the beginning of the year?
a.$706
b.$310
c.$360
d $330
e none of the above
To calculate the cost of goods sold (COGS) for Patrica in 2012, we need to use the FIFO (First-In, First-Out) method of inventory valuation.
Step 1: Calculate the cost of the sold units:
- Patrica sold 30 units in 2012.
- First, we need to use the units purchased at the highest price until we reach the number of units sold.
- Patrica bought 18 units at $14. This means we use all these units since the number of units sold is lower than the number of units purchased at this price.
- So, the cost of the 18 units sold is 18 * $14 = $252.
Step 2: Calculate the remaining number of units sold:
- We have sold only 30 units in total, and we have already used 18 units in Step 1.
- So, we still need to calculate the remaining 30 - 18 = 12 units sold.
Step 3: Calculate the cost of the remaining units sold:
- We need to continue using the FIFO method to determine the cost of the remaining units.
- Patrica bought 26 units at $9.
- Since we only need 12 units, we use the 12 units purchased at $9 each.
- So, the cost of the remaining 12 units sold is 12 * $9 = $108.
Step 4: Calculate the total cost of goods sold (COGS):
- Add up the costs of the sold units from Step 1 and Step 3.
- $252 + $108 = $360.
Therefore, the cost of goods sold (COGS) for Patrica in 2012, assuming no inventory at the beginning of the year, is $360.
The correct answer is option c) $360.
To determine the cost of goods sold using the FIFO (First-In, First-Out) method, we need to follow these steps:
1. Calculate the total cost of each batch of inventory purchased:
- 20 units at $11 = $220
- 26 units at $9 = $234
- 18 units at $14 = $252
2. Determine the total number of units available for sale:
- 20 + 26 + 18 = 64 units
3. Determine the number of units sold:
- 30 units were sold
4. Calculate the cost of goods sold based on the FIFO method:
- Start with the first batch of inventory purchased and allocate the cost until the number of units sold is reached. If additional batches are needed, move on to the next batch.
- First, we allocate the cost of the 20 units purchased at $11 each:
- 20 units * $11 = $220
- The remaining inventory is now 44 units (64 - 20).
- Next, we allocate the cost of the 26 units purchased at $9 each:
- We only need to allocate the cost for 14 units here (30 - 20 = 10, 26 - 10 = 16). The remaining 12 units will go to the next batch.
- 14 units * $9 = $126
- The remaining inventory is now 30 units (44 - 14).
- Finally, we allocate the cost of the 18 units purchased at $14 each:
- We only need to allocate the cost for the remaining 16 units here (30 - 20 - 14 = 4, 18 - 4 = 14).
- 16 units * $14 = $224
5. Add up the allocated costs for each batch:
- $220 + $126 + $224 = $570
Therefore, the cost of goods sold for Patricia in 2012 using the FIFO method would be $570.
Since none of the given options match the calculated value, the correct answer would be "e) none of the above".