2/3 Purchases 900 books at #1,000 each
4/3 Purchases 590 books at ₦950 each
15/3 Sales 300 books at #900 eachDetermine the cost of goods sold using FIFO
To determine the cost of goods sold using the FIFO (First-In, First-Out) method, we assume that the first items purchased are the first items sold.
Here's how we can calculate the cost of goods sold using the FIFO method based on the given information:
1. First, we calculate the total cost of books purchased on 2/3.
Quantity purchased = 900
Cost per book = #1,000
Total cost = Quantity purchased x Cost per book
= 900 x #1,000
= #900,000
Therefore, the total cost of books purchased on 2/3 is #900,000.
2. Next, we calculate the total cost of books purchased on 4/3.
Quantity purchased = 590
Cost per book = ₦950
Total cost = Quantity purchased x Cost per book
= 590 x ₦950
= ₦560,500
Therefore, the total cost of books purchased on 4/3 is ₦560,500.
3. We calculate the total cost of goods available for sale by adding the total cost of books purchased on 2/3 and 4/3.
Total cost of goods available for sale = #900,000 + ₦560,500
= #1,460,500
Therefore, the total cost of goods available for sale is #1,460,500.
4. Next, we calculate the cost of goods sold using the FIFO method.
According to the given information, 300 books were sold on 15/3. We assume that these are the first 300 books purchased.
Quantity sold = 300
Cost per book = cost of the oldest book available
= #1,000 (because the books purchased on 2/3 were the oldest)
Total cost of goods sold = Quantity sold x Cost per book
= 300 x #1,000
= #300,000
Therefore, the cost of goods sold using the FIFO method is #300,000.
Hence, the correct option is #300,000.