A firm has beginning inventory of 300 units at a cost of $11 each. Production during the period was 650 units at $12 each. If sales were 700 units, what is the cost of goods sold (assume FIFO)?
8000
To calculate the cost of goods sold (COGS) using the FIFO (first-in, first-out) method, we need to follow these steps:
Step 1: Determine the cost of goods available for sale.
Step 2: Calculate the cost of goods sold.
Step 3: Find the cost per unit.
Step 4: Calculate the cost of goods sold.
Let's go through each step:
Step 1: Determine the cost of goods available for sale.
The cost of goods available for sale is the sum of the beginning inventory and the production during the period.
Cost of goods available for sale = Beginning inventory + Production during the period
Cost of goods available for sale = (300 units × $11 per unit) + (650 units × $12 per unit)
Cost of goods available for sale = $3300 + $7800
Cost of goods available for sale = $11100
Step 2: Calculate the cost of goods sold.
To calculate the cost of goods sold, we need to identify the number of units sold. In this case, 700 units were sold. Since we are using the FIFO method, we will assume that the units sold are the first units acquired.
Step 3: Find the cost per unit.
To find the cost per unit, we divide the cost of goods available for sale by the total number of units available for sale.
Cost per unit = Cost of goods available for sale / Total units available for sale
Cost per unit = $11100 / (300 units + 650 units)
Cost per unit = $11100 / 950 units
Cost per unit ≈ $11.68 (rounded to two decimal places)
Step 4: Calculate the cost of goods sold.
The cost of goods sold is found by multiplying the cost per unit by the number of units sold.
Cost of goods sold = Cost per unit × Units sold
Cost of goods sold = $11.68 × 700 units
Cost of goods sold ≈ $8176 (rounded to the nearest dollar)
Therefore, the cost of goods sold using the FIFO method is approximately $8176.
To calculate the cost of goods sold using the FIFO (First-In, First-Out) method, we need to determine which units were sold first.
In this case, we have:
Beginning inventory: 300 units at $11 each
Production during the period: 650 units at $12 each
Sales: 700 units
Since FIFO assumes that the first units purchased or produced are the first ones sold, we need to identify which units from the beginning inventory and production were sold.
First, let's calculate the cost of the units in the beginning inventory that were sold:
300 units from the beginning inventory were sold. The cost per unit is $11. Therefore, the cost of the units sold from the beginning inventory is:
300 units * $11 per unit = $<<300*11=3300>>3300
Next, let's calculate the cost of the additional units produced during the period that were sold:
To determine the cost of the units sold from production, we need to subtract the remaining units in the beginning inventory (100 units left from the 400 in total) from the total sales.
Remaining units in the beginning inventory: 100 units
Sales - Remaining units in the beginning inventory = Units sold from production
700 units - 100 units = 600 units
The cost per unit from production is $12. Therefore, the cost of the units sold from production is:
600 units * $12 per unit = $<<600*12=7200>>7200
Finally, we can calculate the cost of goods sold by summing the cost of units sold from the beginning inventory and the cost of units sold from production:
Cost of goods sold = Cost of units sold from the beginning inventory + Cost of units sold from production
Cost of goods sold = $3300 + $7200 = $<<3300+7200=10500>>10500
Therefore, the cost of goods sold (assuming FIFO) is $10,500.