A company has inventory of 10 units at a cost of $10 each on June 1. On June 3, they purchased 20 units at $12 each. 12 units are sold on June 5. Using the FIFO perpetual inventory method, what is the cost of the 12 units that were sold

$124

Explanation:

Companies using perpetual inventory system normally have an inventory card  known as perpetual inventory card for determing the quantity of inventory purchased, amount of inventory purchased, sold inventory and remaining inventory.

Under the perpetual inventory system they are two type of transactions for a sold merchandise:

With perpetual FIFO, the beginning costs are the normally moved from the Inventory account and debited to the Cost of Goods Sold account.

Given that:

The company has inventory of 10 units at a cost of $10 each on June 1, purchased  units at $12  and then sold 12 units on June 5.

The company would sell 10 units at $10 and the remaining 2 units at $12

The cost of the 12 units that were sold = (10 units × $10) + (2 units × $12) = $100 + $24 = $124