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 on the May 5 sale closest to?
A)$6,100
B)$8,100
C)$8,200
D)$8,550

Question

Quizplus · Accepted Answer

The gross margin on the May 5 sale is the difference between the selling price and the cost of goods sold. The cost of goods sold is the cost of the units that were sold. Since the company uses a perpetual system and the FIFO cost flow assumption, the cost of the units that were sold is the cost of the first units that were purchased. The first units that were purchased were the 100 units that were in beginning inventory. The cost of these units is $2,000. The selling price of the 900 units that were sold on May 5 is $30.00 per unit, for a total of $27,000. Therefore, the gross margin on the May 5 sale is $27,000 - $2,000 = $25,000.

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

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