Given the following information, what would the gross margin be for the December 15 sale under the FIFO method in a perpetual inventory system? $$\begin{array} { | c | l | }
\hline \text { Dates } & \text { Units of Inventory } \
\hline \text { Opening Inventory } & 200 \text { units at } \$ 5.00 \
\hline \text { Purchases: } & \
\hline\text { April } 12 & 300 \text { units at } \$ 5.10 \
\hline \text { July 7 } & 400 \text { units at } \$ 5.25 \
\hline \text {Sales: } \
\hline \text { August } 12 &100 \text { units at } \$ 8.00 \
\hline \text { December } 15 & 500 \text { units at } \$ 8.20 \
\hline
\end{array}$$
A)$1,813
B)$1,845
C)$1,785
D)$3,055

Question

Given the following information, what would the gross margin be for the December 15 sale under the FIFO method in a perpetual inventory system? $$\begin{array} { | c | l | } 
\hline \text { Dates } & \text { Units of Inventory } \
\hline \text { Opening Inventory } & 200 \text { units at } \$ 5.00 \
\hline \text { Purchases: } & \
\hline\text { April } 12 & 300 \text { units at } \$ 5.10 \
\hline \text { July 7 } & 400 \text { units at } \$ 5.25 \
\hline \text {Sales:  } \
\hline \text { August } 12 &100 \text { units at } \$ 8.00  \
\hline \text { December } 15 & 500 \text { units at } \$ 8.20 \
\hline
\end{array}$$
A)$1,813
B)$1,845
C)$1,785
D)$3,055

Quizplus · Accepted Answer

Under FIFO, the oldest inventory costs are used first. For the December 15 sale of 500 units: 200 units from opening inventory at $5.00, 300 units from April 12 purchase at $5.10. Total cost = (200 x $5.00) + (300 x $5.10) = $1,020 + $1,530 = $2,550. Revenue = 500 x $8.20 = $4,100. Gross margin = $4,100 - $2,550 = $1,550.

Given the Following Information, What Would the Gross Margin Be