Grays Company has inventory of 17 units at a cost of $12 each on August 1. On August 3, it purchased 27 units at $11 each. 19 units are sold on August 6. Using the perpetual FIFO inventory method, what amount will be reported as cost of goods sold for the 19 units that were sold

Cost of goods sold =$226

Explanation:

Under the First in First Out (FIFO) method of the perpetual inventory system, it assumed that the first batch of inventory received into the store should be issued out first. Therefore, inventories are valued using the price of the oldest batch in turn according to when the batches arrive.

The 19 units of units sold in August 6 would be valued as follows:

17 units at $12 per  units =  204

2 units at $11 per unit =      22

Cost of goods sold = 204 + 22 = $226

Cost of goods sold =$226

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