Question

Question 19 A company just starting in business purchased three merchandise inventory items at the following prices. First purchase $70; Second purchase $80; Third purchase $75. If the company sold 2 units for a total of $230 and used FIFO costing, the gross profit for the period would be A) $85. B) $80. C) $70. D) $75.

Answer 1

Answer:

Answer is A. USD 80/-

Explanation:

Using FIFO costing, we get:

• Gross Profit = Sales - Cost of Goods Sold

COGS (Cost of Goods Sold) for two units,

COGS = First purchase + Second purchase

COGS = $70 + $80

COGS = $150

Sales = $230

• Calculating the Gross Profit:

GP (Gross Profit) = Sales - Cost of Goods Sold

GP = $230 - $150

GP = $80

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