Question

A company just starting in business purchased three merchandise inventory items at the following prices. March 2, $150; March 7, $160; and March 15, $180. If the company sold two units for $250 each on March 10 and March 20, and used the FIFO cost formula in a perpetual inventory system, the gross profit for March would be

Answer 1

Answer:

$290

Explanation:

Gross profit is the difference between the sales and cost of items or goods sold. The FIFO cost formula or inventory valuation method is one in which inventory items are sold on the basis of first in first out that is, based on date of purchase.

As such, where 2 items of 3 are sold, the cost of goods sold

= $150 + $160

= $310

Total sales = 2 × $250

= $500

Gross profit = $500 - $310

= $290