if gibson company uses the average cost method inventory cost flow assumption, what amount will it report as gross profit for august?

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28-10-2022
Business

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if gibson company uses the average cost method inventory cost flow assumption, what amount will it report as gross profit for august?

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anzlaiman anzlaiman · Answer 1 · 2022-11-09T14:37:39-05:00

Gross profit is $7,020

Using the average inventory cost assumption, the weighted average cost of units available for sale is multiplied by the number of units sold to produce cost of goods sold. Weighted average cost of units available for sale: {(200 × $8) + ($200 × $10) + (400 × $12)} = $8,400; $8,400 ÷ 800 units available for sale = unit price $10.50. 520 units were sold (180 + 340), so cost of goods sold is $5,460 (520 × $10.50). Sales revenue is $12,480 (520 × $24). Gross profit is $7,020 ($12,480 - $5,460).

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