On December 31 of last year, Wolfson Corporation had in inventory 400 units of its product, which cost $21 per unit to produce. During January, the company produced 800 units at a cost of $24 per unit. Assuming that Wolfson Corporation sold 700 units in January, what was the cost of goods sold (assume FIFO inventory accounting)?
15,600 units sold
I only want find the answer of exercise
To determine the cost of goods sold (COGS) using the FIFO inventory accounting method, we need to start by recognizing which units were sold first and calculate the corresponding cost. FIFO (First-In, First-Out) assumes that the first units purchased or produced are the first ones to be sold.
Given information:
- Beginning inventory on December 31: 400 units
- Cost of producing each unit: $21
- Units produced in January: 800
- Cost of producing each unit in January: $24
- Units sold in January: 700
First, let's determine the units remaining in inventory at the end of January. To do this, we need to subtract the units sold from the sum of the beginning inventory and the units produced in January.
Units remaining in inventory at the end of January = Beginning inventory + Units produced in January - Units sold
Units remaining in inventory at the end of January = 400 + 800 - 700
Units remaining in inventory at the end of January = 500 units
Now, let's calculate the cost of goods sold (COGS):
COGS = Cost of units sold in December + Cost of units produced in January
1. Calculate the cost of units sold in December: The number of units sold in December is equal to the beginning inventory minus the units remaining in inventory at the end of December.
Units sold in December = Beginning inventory - Units remaining in inventory at the end of December
Since the beginning of December inventory is not given, we cannot calculate this accurately. Let's assume there were no sales in December for simplicity.
Units sold in December = 0
2. Calculate the cost of units produced in January: Multiply the number of units produced in January by the cost per unit.
Cost of units produced in January = Units produced in January * Cost per unit
Cost of units produced in January = 800 units * $24 per unit
Cost of units produced in January = $19,200
3. Calculate the total COGS:
COGS = Cost of units sold in December + Cost of units produced in January
COGS = 0 + $19,200
COGS = $19,200
Therefore, the cost of goods sold (COGS) in January, assuming FIFO inventory accounting, is $19,200.