From the following inventory amounts, two units are sold. Under the FIFO method, what are the COGS and ending inventory valuation?

• A. COGS $400, Valuation $500
• B. COGS $600, Valuation $300
• C. COGS $800, Valuation $100
• D. COGS $400, Valuation $600

Answer: (A)

Under FIFO, the first units purchased are the ones that are sold first. So when two units are sold, the COGS comes from the cost of the two oldest units, and the ending inventory is valued at the cost of the more recently purchased units.

In the given data set, the two oldest costs sum to 400, and the remaining (more recent) costs sum to 500. That means the COGS is 400 and the ending inventory is 500, which matches the provided correct result.

Remember the relationship: total cost of goods available for sale equals COGS plus ending inventory. Here that total would be 900, with two units sold under FIFO resulting in COGS of 400 and ending inventory of 500.