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A company had beginning inventory of 5 units that cost $10 each. During the month, 15 units were purchased for $11 each. The company sold 12 units during the month and had 8 remaining in ending inventory. If the company uses FIFO to calculate cost of goods sold, then its gross profit will be $5

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ayokenny2001

It is true that the gross profit will be $5, If the company uses FIFO to calculate cost of goods sold.

What is FIFO?

First-in, first-out (FIFO) is a valuation method in which the assets produced or acquired first are sold, used, or disposed of first.

Under First in First out method, items that were purchased first will be availed for sale first.  In this case, the opening stock of 5 at $10 items will be sold first.  An additional 7 units will be required from the next batch of purchases at $11.

The costs of the first 12 units will be

= (5 x 10)+ (7 x 11)

= 50 +77

= $127

With LIFO, the items acquired last will be sold first. In this case, the 12 items sold will come the batch of 15 purchased at $11 in the months

Using LIFO, the cost of goods available for sale.

= 12 X $11

= 132

The difference is the costs of goods available for sale is $ 5, with FIFO having a lower cost. It means FIFO profits will be $5 more.

Learn more about FIFO here : https://brainly.com/question/24938626

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