gageNOWv2 | Online teaching and from The Boxwood Company sells blankets for $32.

Question

gageNOWv2 | Online teaching and from The Boxwood Company sells blankets for $32.00 each. The following was taken from the inv beginning inventory on May 1. entory records during May. The company had no Blankets Units May 03 Purchase May 10 Sale May 17 Purchase May 20 Sale May 23 Sale May 30 Purchase $10.00 15 10 $13.00 Assuming that the company uses the perpetual inventory system, determine the gross profit for the sale of May 23 using the FIFO inventory cost method. Select the correct answer. O$204 O$170 $120 ?$146 Previous Next

Explanation / Answer

Fifo method means first in first out. As per this method whichever inventory comes first it will be sold first.

So in this question-

on May 3- Purchased 29 units@10

On May 10- Sold 12 blankets from 29 units, so now stock available is 17units @10 (i.e 29-12= 17 units)

On May 17- Purchased 39 units@12

so now we have two kind of inventory(Blanket)

1. 17 units @ 10

2. 39 units @ 12

On May 20- Sold 15 units, Now as per FIFO method we will sell the 15 units from the first available inventory that is 17 units purchased @ 10.

After selling 15 units the available inventory is

1. 2 units @ 10

2. 39 units @ 12

On May 23- sell 10 units

So As per FIFO method we will sell the first 2 units from first lot purchased @ 10 & rest 8 units from second lot purchased @ 12.

so total purchase price will be $116 (i.e 20+96 ;as per calculation below)

2* 10= 20 &

8* 12= 96

& Selling price is 10*32= $320 (as per question)

So now gross profit on 23 may will be sale price less cost or purchase price

320-116= $204

So option A is correct.

Related Questions

Navigate

• Browse (All)
• Browse G
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.