Hopewell Ltd.had 1,000 units of inventory on hand at the beginning of the year worth $4,000.During the year, they purchased 15,000 units at $4.25 and 10,000 units at $4.40.They sold 24,500 units during the year at an average price of $7.50 and pay taxes at 25%.If Hopewell uses average cost for inventory valuation, what was their gross profit for the year closest to?

Question

Quizplus · Accepted Answer

The average cost per unit is calculated as the total cost of inventory divided by the total units available for sale. Total cost = (1,000 units * $4.00) + (15,000 units * $4.25) + (10,000 units * $4.40) = $4,000 + $63,750 + $44,000 = $111,750. Total units = 1,000 + 15,000 + 10,000 = 26,000 units. Average cost per unit = $111,750 / 26,000 = $4.2981. Cost of goods sold (COGS) = 24,500 units * $4.2981 = $105,600. Gross profit = Sales - COGS = (24,500 units * $7.50) - $105,600 = $183,750 - $105,600 = $78,150. The closest option is $78,400.00.