Stubbs Company uses the perpetual inventory method. On January 1, Year 1, Stubbs purchased 400 units of inventory that cost $8.00 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.

Question

Quizplus · Accepted Answer

[(400 × $8.00) + (600 × $9.00)] ÷ 1,000 = $8.60 per unit; 700 × $8.60 = $6,020 cost of goods sold; $11,200 sales - $6,020 cost of goods sold = $5,180 gross margin

Stubbs Company Uses the Perpetual Inventory Method