If 3 bananas cost \$0.99, what is the cost of goods sold (COGS) for 12 bananas under both perpetual and periodic inventory systems, assuming all 12 bananas are sold at the same rate?

• A. \$3.30 under both systems
• B. \$3.96 under perpetual, \$3.30 under periodic
• C. \$0.99 under perpetual, \$3.96 under periodic
• D. \$3.96 under both systems

Answer: (D)

Verified step by step guidance

1. Step 1: Understand the concept of Cost of Goods Sold (COGS). COGS represents the direct costs attributable to the production of goods sold by a company. In this case, it refers to the cost of the bananas sold.
2. Step 2: Calculate the cost per banana. Since 3 bananas cost \$0.99, divide \$0.99 by 3 to find the cost of one banana. Use the formula: $\frac{0.99}{3}$.
3. Step 3: Determine the total cost for 12 bananas. Multiply the cost per banana by 12 using the formula: $12\times \frac{0.99}{3}$.
4. Step 4: Understand the difference between perpetual and periodic inventory systems. In both systems, the COGS calculation for this problem remains the same because all 12 bananas are sold at the same rate, and there are no inventory fluctuations or additional purchases.
5. Step 5: Conclude that the COGS for 12 bananas under both perpetual and periodic inventory systems is the same, as the cost per unit and the quantity sold are consistent.