Question

Question 8
A company that sells transmogrifiers uses FIFO for its inventory accounting. It had 100 transmogrifiers in Inventory on 12/31/2011 with a total cost of $160,000. The company bought 50 transmogrifiers costing $90,000 on 3/3/12; another 50 transmogrifiers costing $100,000 on 6/6/12; and another 100 transmogrifiers costing $250,000 on 9/9/12. During 2012, the company sold 175 transmogrifiers. What was Cost of Goods Sold during 2012?


$260,000



$300,000



$160,000



$250,000



$350,000


1 point
9.
Question 9
A company

Answer 1

To calculate the Cost of Goods Sold (COGS) using the FIFO (First-In, First-Out) method, we will account for the costs of the transmogrifiers sold during the year based on the order in which they were purchased.

1. **Beginning Inventory (as of 12/31/2011)**:
- 100 transmogrifiers at a total cost of $160,000
- Cost per unit = $160,000 / 100 = $1,600 per unit

2. **Purchases in 2012**:
- 3/3/12: 50 transmogrifiers at a total cost of $90,000
- Cost per unit = $90,000 / 50 = $1,800 per unit
- 6/6/12: 50 transmogrifiers at a total cost of $100,000
- Cost per unit = $100,000 / 50 = $2,000 per unit
- 9/9/12: 100 transmogrifiers at a total cost of $250,000
- Cost per unit = $250,000 / 100 = $2,500 per unit

3. **Total Sold**:
- The company sold a total of 175 transmogrifiers.

**Calculating COGS** using FIFO:
- The first 100 transmogrifiers sold will come from the beginning inventory:
- 100 units at $1,600 each = $160,000

- The next 75 transmogrifiers sold will come from the first purchase (3/3/12):
- 50 units at $1,800 each = $90,000
- 25 units at $2,000 each = $50,000

Now, let's add these amounts together to find the total COGS for 2012.

- From beginning inventory: $160,000
- 50 from the March purchase: $90,000
- 25 from the June purchase: $50,000

Total COGS = $160,000 + $90,000 + $50,000 = $300,000

Therefore, the Cost of Goods Sold during 2012 is **$300,000**.