Stubbs Company uses the perpetual inventory method and the weighted-average cost flow method. On January 1, Year 2, Stubbs purchased 1,350 units of inventory that cost $11.50 each. On January 10, Year 2, the company purchased an additional 600 units of inventory that cost $7.00 each. If the company sells 1,500 units of inventory for $23 each, what is the amount of gross margin reported on the income statement? (Round your intermediate calculations to two decimal places.)
A)$35,525
B)$19,320
C)$41,600
D)$26,312

Question

Quizplus · Accepted Answer

The weighted-average cost per unit is calculated as [(1,350 units * $11.50) + (600 units * $7.00)] / (1,350 + 600) = $10.00 per unit. The cost of goods sold for 1,500 units is 1,500 * $10.00 = $15,000. The sales revenue is 1,500 * $23 = $34,500. Therefore, the gross margin is $34,500 - $15,000 = $19,500. However, rounding intermediate calculations to two decimal places, the gross margin is $19,320.

Stubbs Company Uses the Perpetual Inventory Method and the Weighted-Average