Inventory purchase and sales data are as follows. [Note: There was no inventory

Question

Inventory purchase and sales data are as follows. [Note: There was no inventory before the purchase made on January 1.]

Purchased on January 1 -- 100 units, $9 cost per unit

Purchased on January 16 -- 300 units, $8 cost per unit

Purchased on January 25 -- 400 units, $7 cost per unit

Sold on January 31 -- 500 units, $10 selling price per unit

Assume that the company uses FIFO. Compute GROSS MARGIN for January.

  $2,100

  $1,100

  $2,500

  $1,000

  $1,400

  $2,100

  $1,100

  $2,500

  $1,000

  $1,400

Explanation / Answer

Number of units sold = 500 units Cost of goods sold ( 500 units) on FIFO January 1 purchase 100 units @ 9 per unit = 900 January 16 purchase 300 units @ 8 per unit = 2400 January 25 purchase 100 units @ 7 per unit = 700 Total Cost of goods sold 4000 Sales ( 500 * 10) 5000 Less : Cost of goods sold 4000 Gross Margin for January 1000

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