To calculate the cost of goods sold (COGS) using the First-In, First-Out (FIFO) method, we need to follow these steps:
1. Identify the order of inventory received: According to FIFO, we will sell the oldest inventory first. The order of purchases is as given in the table.
2. Determine the quantity sold: The company sold 100 units in June.
3. Allocate the costs to sold units: Start from the earliest received units and move to the next batch if required. Continue until all 100 units are allocated.
Here are the detailed steps:
1. June 4:
- Units received: 40
- Unit cost: \[tex]$1.80
- Units sold from this batch: 40 units (since units sold >= units received)
- Cost: \( 40 \text{ units} \times \$[/tex]1.80 / \text{unit} = \[tex]$72.00 \)
2. June 11:
- Units received: 70
- Unit cost: \$[/tex]1.50
- Units sold from this batch: 60 units (since 100 - 40 = 60 units still need to be allocated)
- Cost: [tex]\( 60 \text{ units} \times \$1.50 / \text{unit} = \$90.00 \)[/tex]
By adding the costs from batches (June 4 and June 11):
[tex]\[ \$72.00 + \$90.00 = \$162.00 \][/tex]
Thus, the cost of goods sold (COGS) using the FIFO method for June is:
[tex]\[ \$162.00 \][/tex]
