Math Problem Statement

Beginning Balance of Inventory is 400 Units and the cost is $200 per Unit.

October 5 Company X purchases 400 Units at a cost of $220 per Unit.

October 9 Company X sells 600 units for $500 per Unit.

October 17 Company X purchases 200 Units at a cost of $230 per Unit.

October 27 Company X sells 300 units for $500 per Unit.

October 29 Company X purchases 200 units for $250 per Unit.

Using FIFO Perpetual, what is the COGS for Company X for the month of October?

Solution

In this problem, we are calculating the Cost of Goods Sold (COGS) using the FIFO (First-In, First-Out) method under a perpetual inventory system. This method assumes that the earliest (first) inventory purchased is the first to be sold.

Inventory Transactions and COGS Calculation:

  1. Beginning Inventory (October 1):

    • 400 units @ $200/unit
    • Total cost: 400×200=80,000400 \times 200 = 80,000

  2. Purchase on October 5:

    • 400 units @ $220/unit
    • Total cost: 400×220=88,000400 \times 220 = 88,000

  3. Sale on October 9:

    • Company sells 600 units.

    • Since we are using FIFO, the first 400 units will come from the beginning inventory (costing $200 each), and the next 200 units will come from the purchase on October 5 (costing $220 each).

    • COGS:

      • 400×200=80,000400 \times 200 = 80,000 (from beginning inventory)
      • 200×220=44,000200 \times 220 = 44,000 (from October 5 purchase)
      • Total COGS for this sale: 80,000+44,000=124,00080,000 + 44,000 = 124,000

    • Remaining Inventory after Sale:

      • 200 units from

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Math Problem Analysis

Mathematical Concepts

Inventory Management
Cost of Goods Sold (COGS)
FIFO (First-In, First-Out) Method
Perpetual Inventory System

Formulas

COGS = (Units Sold × Cost per Unit from First Purchase)
Remaining Inventory = Total Inventory - Units Sold

Theorems

-

Suitable Grade Level

College Level (Accounting or Business Studies)

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