Rabasto Company began business on January 1, 20X1. During 20X1 and 20X2 the firm
ID: 2498634 • Letter: R
Question
Rabasto Company began business on January 1, 20X1. During 20X1 and 20X2 the firm made the following purchases:
20X1:
January 7 150 units @ $4.00
February 9 100 units @ $4.20
April 29 250 units @ $4.40
July 21 200 units @ $4.40
September 4 160 units @ $4.50
November 12 140 units @ $4.60
20X2:
January 27 200 units @ $4.70
March 17 1,200 units @ $4.80
August 9 800 units @ $4.76
December 4 120 units @ $4.72
During 20X1, the firm sold 720 units. During 20X2, the firm sold 2,400 units.
Using FIFO, what is Cost of Goods Sold in 20X2, the second year? Note: Don’t forget that ending inventory for 20X1 becomes beginning inventory of 20X2.
$3,212.00
$3,090.00
$947.20
$810.00
$1,152.00
$1,274.00
$11,401.20
$11,416.40
$3,212.00
$3,090.00
$947.20
$810.00
$1,152.00
$1,274.00
$11,401.20
$11,416.40
Explanation / Answer
Total purchases in 2001 = 150+100+250+200+160+140 = 1000 units
Total units sold in 2001 = 720 units
Ending inventory in 2001 = 1000-720 = 280 units
Since FIFO is used these 280 units represents 140 units purchased on Nov 12 and balance 140 units purchased on Sept 4
Calculation of cost of goods sold in 2002, total 2400 units were sold
First 280 units sold from ending inventory of 2001
= (140 units * 4.60) + (140 units * 4.50) = $1274
Next 200 units from purchase of Jan 27, 2002 = (200*4.7) = $940
Next 1200 units from Mar 17,2002 purchase = (1200*4.8) = $5760
Remaining 720 units from Aug 9,2002 purchase = (720*4.76) = $3427.2
Therefore, cost of goods sold in 2002, second year = $11401.20
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