Stubbs Company uses the perpetual inventory method and the weighted-average cost flow method.On January 1,Year 2,Stubbs purchased 400 units of inventory that cost $8.00 each.On January 10,Year 2,the company purchased an additional 600 units of inventory that cost $9.00 each.If the company sells 700 units of inventory for $16.00 each,what is the amount of gross margin reported on the income statement?
A)$5,180
B)$5,250
C)$5,000
D)$6,020

Question

Quizplus · Accepted Answer

Average cost per unit = Total cost of the inventory available ÷ Total number of units available
Average cost per unit = [(400 × $8.00)+ (600 × $9.00)] ÷ 1,000 = $8.60 per unit
Cost of goods sold = 700 × $8.60 = $6,020
Gross margin = Sales - Cost of goods sold
Gross margin = $11,200 - $6,020 = $5,180

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