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A merchandiser buys 10 units at $1, 10 units at $2, and 10 units at $3, for 30 identical units in total. Using FIFO, what is the cost of merchandise sold when one unit is sold?
A$6
B$3
C$2
D$1
Answer & Solution
Correct answer: D. $1
1. FIFO assigns the cost of the earliest units purchased to cost of merchandise sold.
2. The earliest purchase was 10 units at $1 each.
3. The one unit sold is therefore costed at $\$1$.
_Source: Jonick, Principles of Financial Accounting (CC BY-SA 4.0), §4.1 "Inventory", p.113_
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