The Acme Corporation starts the year with a beginning inventory of 300 units at $5 per unit. The company purchases 500 units at $4 each in February and 200 units at $6 each in October. Acme sells 150 units during the year. Acme has a periodic inventory system and uses the FIFO inventory costing method. What is the amount of cost of goods sold?

A. $750
B. $900
C. $600
D. $934

Answer: A. $750
First-in, first-out (FIFO) assumes that the costs of the first goods purchased (first in) are the costs of the first goods sold (first out). As such, since 300 units were in the beginning inventory and we only sold 150 during the sold, we use the $5 per unit cost of the beginning inventory units to calculate cost of goods sold.
Cost of goods sold = 150 units × $5 per unit = $750