Using FIFO, if purchases are 50 units at $10, 30 units at $12, and 20 units at $15, and 60 units are sold, what is the COGS?

Using FIFO, if purchases are 50 units at $10, 30 units at $12, and 20 units at $15, and 60 units are sold, what is the COGS?

• A. $620
• B. $720
• C. $780
• D. $900

Answer: (A)

Under FIFO, the cost of goods sold uses the oldest purchases first. With 50 units bought at $10, 30 at $12, and 20 at $15, selling 60 units drains the earliest stock: all 50 units from the $10 batch, plus 10 units from the $12 batch. COGS = (50 × 10) + (10 × 12) = 500 + 120 = 620. The remaining inventory would be 20 units at $12 and 20 units at $15. The other total options would come from using more of the newer costs, which FIFO does not do in this sale.

Under FIFO, the cost of goods sold uses the oldest purchases first. With 50 units bought at $10, 30 at $12, and 20 at $15, selling 60 units drains the earliest stock: all 50 units from the $10 batch, plus 10 units from the $12 batch. COGS = (50 × 10) + (10 × 12) = 500 + 120 = 620. The remaining inventory would be 20 units at $12 and 20 units at $15. The other total options would come from using more of the newer costs, which FIFO does not do in this sale.