Question

when merchandise sold is assumed to be in the order in which the purchases were made, the company is using a. first-in, first-out b. last-in, first-out c. first-in, last-out d. average cost

Answer 1

Answer:

The correct answer is a.first-in, first-out.

Explanation:

When merchandise sold is assumed to be in the order in which the purchases were made, the company is using first-in, first-out. For example a company purchases on 1 jan 50 chairs at the rate $ 100 each and on 10 jan it purchases 30 chair at the rate of $ 120 each. On 15 jan it sold 30 chair so the cost it will charge in COGS = (100*30) $ 3000 under FIFO method.