Acompany has beginning inventory of 10 units at a cost of $30 each on february 1. on february 3, it purchases 40 units at $32 each. 13 units are sold on february 5. using the fifo periodic inventory method, what is the cost of the 13 units that are sold?

$396

Explanation:

10 units at a cost of $30 each on February 1

Total cost of inventory on February 1 = $30 × 10 = $300

On February 3, it purchases 40 units at $32 each

Total cost of purchase = $32 × 40 = $1,280

Total cost of inventory on February 3 = $1,280 + $300 = $1,580

13 units are sold on February 5 using FIFO. This means that the inventory items available on February 1 would be sold first then the items purchased on February 3. This means that if 13 items were sold on this principle (FIFO), 10 items from February 1 and 3 items from February 3 were sold.

Cost of sales = ($30 × 10) + ($32 × 3)

                      = $300 + $96

                      = $396

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