Stubbs Company uses the perpetual inventory method. On January 1, Year 1, Stubbs purchased 400 units of inventory that cost $8.0

Question

3 years ago

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Stubbs Company uses the perpetual inventory method. On January 1, Year 1, Stubbs purchased 400 units of inventory that cost $8.0

0 each. On January 10, Year 1, the company purchased an additional 600 units of inventory that cost $9.00 each. If Stubbs uses a weighted average cost flow method and sells 700 units of inventory for $16.00 each, the amount of gross margin reported on the income statement will be:
A. $5,180.
B. $5,250.
C. $5,000.
D. $6,020.

Business

1 answer:

Sonja [21] · Answer 1 · 2022-08-05T20:25:48+03:00

Answer:

A. USD 5,180/-

Explanation:

In the actual method of inventory valuation, the inventory reaming and the COGS (Cost Of Goods Sold) is measured after each purchase or sale of a transaction. So the COGS and the remaining value of the inventory is known all the time.

Formula:

Gross margin is equal to Sales minus COGS