Hoover Company purchased two identical inventory items. The item purchased first
ID: 2571057 • Letter: H
Question
Hoover Company purchased two identical inventory items. The item purchased first cost $42.50. The item purchased second cost $47.25. Then Hoover sold one of the inventory items for $70. Based on this information, the amount of:
Multiple Choice
ending inventory is $47.25 if Hoover uses the LIFO cost flow method.
gross margin is $25.12 if Hoover uses the weighted average cost flow method.
cost of goods sold is $47.25 if Hoover uses the FIFO cost flow method.
cost of goods sold is $42.50 if Hoover uses the LIFO cost flow method.
Explanation / Answer
WEighted cost/unit=Total cost/Total units
=(42.5+47.25)/2=$44.875
Hence gross margin using the weighted average cost flow method=Sales-COGS
=(70-44.875)=$25.12
Hence the correct option is B.
Ending inventory would be $42.5 as per LIFO.COGS would be $42.5 as per FIFO and $47.25 as per LIFO.
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