Question

On December 31 of last year, Wolfson Corporation had in inventory 450 units of its product, which cost $22perunittoproduce.DuringJanuary,thecompanyproduced850unitsatacostof$25 per unit. Assuming that Wolfson Corporation sold 800 units in January, what was the cost of goods sold (assume FIFO inventory accounting)?

Short answer

The cost of goods sold of the company is $18,650.

Step-by-step solution

Ending inventory in units

$\begin{array}{rcl}\mathrm{Ending}\mathrm{inventory}& =& \mathrm{Beginning}\mathrm{inventory}+\mathrm{Units}\mathrm{produced}-\mathrm{Sales}\mathrm{units}\\ & =& 450+850-800\\ & =& 500\end{array}$

Cost of goods sold

$\begin{array}{rcl}\mathrm{Cost}\mathrm{of}\mathrm{goods}\mathrm{sold}& =& \left(\mathrm{Beginning}\mathrm{units}\times \mathrm{Unit}\mathrm{price}\right)+\left(\mathrm{Units}\mathrm{produced}\times \mathrm{Unit}\mathrm{price}\right)-\left(\mathrm{Ending}\mathrm{units}\times \mathrm{Unit}\mathrm{price}\right)\\ & =& \left(450\times \$22\right)+\left(850\times \$25\right)-\left(500\times \$25\right)\\ & =& \$18,650\end{array}$