question archive The inventory records for Radford Co
The inventory records for Radford Co
Subject:FinancePrice:2.87 Bought7
The inventory records for Radford Co. reflected the following
|
Beginning inventory @ May 1 |
100 |
units @ |
$ 4.00 |
|
First purchase @ May 7 |
300 |
units @ |
$ 4.40 |
|
second purchase @ May 17 |
500 |
units @ |
$ 4.60 |
|
Third purchase @ May 23 |
100 |
units @ |
$ 4.80 |
|
Sales @ May 31 |
900 |
units @ |
$ 7.80 |
Determine the amount of gross margin assuming the FIFO cost flow method. A) $2,920
B) $3,420
C) $3,000
D) $4,020
Purchase A New Answer
Custom new solution created by our subject matter experts
GET A QUOTE
Answer Preview
Answer:
C )
Step-by-Step explanation
FIFO method says that the inventory first purchases will be assigned first to the cost of goods sold. Hence, the cost of sales made on May 31 for 900 units can be determined as follows:
First 100 units @ $4.00 = $400
Next 300 units @ $4.40 = $1,320
Next 500 units @ $4.60 = $2,300
The total cost of 900 units = $4,020
Total revenue generated by selling 900 units = 900 x 7.80 = $7,020
Gross Margin = Revenue - Cost of goods sold = $7,020 - $4,020 = $3,000.
