PRC-1 · Chapter 7 · Question 36 of 100
A company values its inventory on a FIFO basis and adopts a perpetual system. On Jan 1: 500 units @ Rs. 60. Jan 11: Purchased 100 units @ Rs. 70. Jan 12: Sold 300 units. What is the value of the Cost of Sales for the Jan 12 transaction?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Rs. 18,000
Explanation
Under FIFO, the first units purchased are the first ones sold. The 300 units sold on Jan 12 are taken from the Jan 1 opening stock (which cost Rs. 60 each). Cost of Sales = 300 x 60 = Rs. 18,000.
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