To determine the cost of goods sold (COGS) using the FIFO (First In, First Out) method given that there are only 18 units left, let's go through the necessary steps and calculations:
1. Determine the units sold:
- The total units available = 68 units.
- Units left = 18 units.
- Therefore, units sold = Total units available - Units left
= 68 units - 18 units
= 50 units.
2. Apply the FIFO method:
- According to FIFO, we sell the oldest inventory first.
3. Calculate the cost of goods sold:
- We need to account for the costs in the order they were acquired, starting with the Beginning Inventory.
- Beginning Inventory:
- Number of units: 25
- Cost per unit: [tex]$1600
- So, the cost for units sold from the beginning inventory = 25 units * $[/tex]1600/unit
= [tex]$40,000
- Second Layer - March 3 Purchase:
- After selling the 25 units from the beginning inventory, we still need to sell 50 units - 25 units = 25 units.
- Number of units available in this layer: 32
- Cost per unit: $[/tex]1700
- Since we only need 25 units from this layer:
- Cost for these 25 units = 25 units * [tex]$1700/unit
= $[/tex]42,500
4. Summing up the costs:
- Sum the costs from both layers to get the total cost of goods sold:
- Cost from Beginning Inventory: [tex]$40,000
- Cost from March 3 Purchase : $[/tex]42,500
- Total Cost of Goods Sold = [tex]$40,000 + $[/tex]42,500
= [tex]$82,500
Therefore, the cost of goods sold is $[/tex]82,500.
