Question

Weiss Company purchased two identical inventory items. The first purchase cost $30 and the second cost $32. The company sold one of the items for $40. If the company uses the weighted average cost flow method, the amount of gross margin shown on the income statement will be

Answer 1

The gross margin shown on the income statement using the weighted average cost method for the sale of one inventory item is $9.

Step-by-step explanation:

The student has asked about calculating the gross margin for a company that uses the weighted average cost flow method after purchasing and selling inventory. To determine the gross margin, we first calculate the weighted average cost of the two inventory items, which is (1 x $30 + 1 x $32) / 2 = $31. The company sold one item for $40, so the gross profit on that item is $40 - $31 = $9. Therefore, if the company uses the weighted average method, the amount of gross margin shown on the income statement for the sale of one item will be $9.