A company has inventory of 10 units at a cost of $10 each on June 1

Management Mar 23, 2021

A company has inventory of 10 units at a cost of $10 each on June 1. On June 3, they purchased 20 units at $12 each. 12 units are sold on June 5. Using FIFO periodic inventory method, what is the cost of the 12 units that were sold?

a. $120

b. $124

c. $128

d. $130

e. $140

Expert Solution

Answer: b .

Since the firm uses the FIFO periodic inventory method, this means earlier inventory will be sold first.

Therefore,

Cost of 12 units sold = 10 Units as on June 1 + 2 units as on June 3

= (10 * $10) + (2 * $12)

= $100 + $24

= $124

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