The Boxwood Company sells blankets for $ 36.00 each. The following was taken from the inventory records during May. The company had no beginning inventory on May 1. Date Product Z Units Cost May 01 Purchase 9 $15.00 May 10 Sale 4 May 17 Purchase 16 $16.00 May 20 Sale 6 May 23 Sale 3 May 30 Purchase 10 $19.00 Assuming that the company uses the perpetual inventory system, determine the cost of goods sold for the sale of May 20 using the FIFO inventory cost method. Select the correct answer. $171.00 $91.00 $156.00 $95.00

Cost of Goods Sold for May 20 using the FIFO inventory cost method is $91 (5 units x $15 + 1 unit x $16).

Explanation:

The FIFO inventory cost method means that goods bought first are the first to be sold.  This implies that for May 20 sales of 6 units, 5 units were from May 1 Purchase at the cost of $15 per unit.  The remaining unit was from May 17 Purchase at the cost of $16 per unit.

These then represent the cost of goods sold on May 20 using the perpetual inventory system and FIFO inventory cost valuation method.

The perpetual inventory system records sales and purchases immediately at the various point of sale and purchase as opposed to the periodic inventory system where records are made periodically.

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