Use the following information for questions:
A company had the following inventory activity during May: $\begin{array}{lrrrr}&\text { Units}&\text { Unit Cost }&\text {Total Cost }&\text { Unit Price }\\hline
\text { Beginning inventory } & 100 & \$ 20.00 & \$ 2,000 & \
\text { Purchase: May 3 } & 900 & \$ 21.00 & 18,900 & \
\text { Sale: May 5 } & (900) & & & \$ 30.00 \
\text { Purchase: May 15 } & 1,000 & \$ 21.00 & 21,000 & \
\text { Sale: } & (900) & & & \$ 30.00
\end{array}$
-If the company uses a perpetual system and the FIFO cost flow assumption, what is the gross margin for the month closest to:
A)$12,100
B)$16,200
C)$16,300
D)$17.100

Question

Quizplus · Accepted Answer

Under the FIFO (First-In, First-Out) method, the earliest costs are assigned to the goods sold first. The company sold 900 units on May 5 and another 900 units later. For the first sale of 900 units: - The cost of goods sold (COGS) includes all 100 units from beginning inventory at $20 each ($2,000 total) and 800 units from the May 3 purchase at $21 each ($16,800 total). This totals $18,800 for the first sale. For the second sale of 900 units: - The COGS includes the remaining 100 units from the May 3 purchase at $21 each ($2,100 total) and 800 units from the May 15 purchase at $21 each ($16,800 total). This totals $18,900 for the second sale. Total COGS = $18,800 (first sale) + $18,900 (second sale) = $37,700. Total sales revenue = 900 units * $30 (first sale) + 900 units * $30 (second sale) = $27,000 + $27,000 = $54,000. Gross margin = Sales revenue - COGS = $54,000 - $37,700 = $16,300.

Use the Following Information for Questions: a Company Had the Following

Use the Following Information for Questions:
a Company Had the Following