Question

The following information is available for C Corp. for the month of March:

Units Unit costs Selling price
260
530
790
1320
Beginning inventory
Purchase
Purchase
Sold
A) $5,940
B) $4,250
C) $2,860
D) $1,690
$6
$6
$7
$11
Assume that the corporation uses the average cost method. Determine the amount of gross profit
for the month of March.

Answer 1

Step-by-step explanation:

To determine the gross profit for the month of March, we need to calculate the cost of goods sold (COGS) and deduct it from the total revenue.

First, we need to calculate the average cost per unit:

(260*$6 + 530*$6 + 790*$7 + 1320*$11) / (260 + 530 + 790 + 1320) = $8.84

Using the average cost method, we assume that the units sold come from a mixture of the beginning inventory and the two purchases. We will calculate the COGS for each sale using the average cost per unit.

Sold:

200 units (from beginning inventory) at a cost of $6 per unit = $1,200 COGS

350 units (from first purchase) at a cost of $6 per unit = $2,100 COGS

500 units (from second purchase) at a cost of $7 per unit = $3,500 COGS

Total COGS = $6,800

To calculate the total revenue, we need to multiply the selling price per unit by the number of units sold:

Total revenue = (200+350+500) * $11 = $10,450

Finally, we can calculate the gross profit by deducting the COGS from the total revenue:

Gross profit = $10,450 - $6,800 = $3,650

Therefore, the answer is C) $2,860.