Signal Company uses the perpetual inventory method. On January 1, 2013, Signal purchased 400 units of inventory that cost $2.00 each. On January 10, 2013, the company purchased an additional 600 units of inventory that cost $2.25 each. If Signal uses a weighted average cost flow method and sells 700 units of inventory for $4.00 each, the amount of gross margin reported on the income statement will be:
A)$1,313.
B)$1,295.
C)$1,225.
D)$1,505.

Question

Quizplus · Accepted Answer

[(400 x $2.00) + (600 x 2.25)]/1000 = $2.15 per unit; 700 x $2.15 = $1,505 cost of goods sold;
$2,800 sales - $1,505 cost of goods sold = $1,295 gross margin

Signal Company Uses the Perpetual Inventory Method