To determine the Cost of Goods Sold (COGS) for December using the FIFO (First-In, First-Out) method, follow these steps:
### Step 1: Identify Inventory and Unit Costs
- Beginning Inventory:
- Units: 100
- Total Cost: \[tex]$20,000
- Unit Cost: \(\$[/tex]200 \text{ (calculated as } \frac{\[tex]$20,000}{100 \text{ units})}\)
- September Purchase:
- Units: 150
- Total Cost: \$[/tex]45,000
- Unit Cost: [tex]\(\$300 \text{ (calculated as } \frac{\$45,000}{150 \text{ units})}\)[/tex]
- October Purchase:
- Units: 300
- Total Cost: \[tex]$120,000
- Unit Cost: \(\$[/tex]400 \text{ (calculated as } \frac{\[tex]$120,000}{300 \text{ units})}\)
- November Purchase:
- Units: 150
- Total Cost: \$[/tex]75,000
- Unit Cost: [tex]\(\$500 \text{ (calculated as } \frac{\$75,000}{150 \text{ units})}\)[/tex]
### Step 2: Calculate the Cost of Goods Sold (COGS)
Using FIFO, we first sell the oldest inventory. For December, 200 units were sold. We start with the units from the beginning inventory and move to the next oldest purchases until we reach 200 units.
1. Begin with Beginning Inventory:
- Units available: 100
- Unit Cost: \[tex]$200
- Cost: \(100 \text{ units} \times \$[/tex]200 \text{ per unit} = \[tex]$20,000\)
- Units sold so far: 100
2. Next, use the September Purchase:
- Units available: 150
- Needed additional units to reach the total 200 units: \(200 \text{ units} - 100 \text{ units} = 100 \text{ units}\)
- Unit Cost: \$[/tex]300
- Cost: [tex]\(100 \text{ units} \times \$300 \text{ per unit} = \$30,000\)[/tex]
- Units sold: 100 (remaining from beginning inventory) + 100 from September = 200 units
### Step 3: Summarize the Cost of Goods Sold
Adding up the costs from the beginning inventory and September:
- From Beginning Inventory: \[tex]$20,000
- From September Purchase: \$[/tex]30,000
Total COGS (Cost of Goods Sold) in December:
[tex]\[
\$20,000 + \$30,000 = \$50,000
\][/tex]
Thus, the Cost of Goods Sold (COGS) during December is \$50,000.
