A company that sells transmogrifiers uses FIFO for its inventory accounting. It had 100 transmogrifiers in Inventory on 12/31/2011 with a total cost of $160,000. The company bought 50 transmogrifiers costing $90,000 on 3/3/12; another 50 transmogrifiers costing $100,000 on 6/6/12; and another 100 transmogrifiers costing $250,000 on 9/9/12. During 2012, the company sold 175 transmogrifiers. What was Cost of Goods Sold during 2012?
FIFO is first-in, first-out. So, COGS will include the costs of the first 175 transmogrifiers acquired. This would be the 100 in inventory on 12/31/2011 plus the 50 bought on 3/3/12 and 25 of the 50 bought on 6/6/12: $160,000 + $90,000 + ($100,000/2) = $300,000.
