MULTIPLE CHOICE At May 1 2016 Marigold Company had beginning

MULTIPLE CHOICE

At May 1, 2016, Marigold Company had beginning inventory consisting of 220 units with a unit cost of $5.50. During May, the company purchased inventory as follows:

720 units at $5.50
560 aunits at $7.00

The company sold 1000 units during the month for $11 per unit. Marigold uses the average cost method. Marigold’s gross profit for the month of May is

Solution

A. $4,940

Average cost per unit = [(220 * $5.50) + (720 * $5.50) + (560 * $7.00)] / 1,500 = $6.06

Gross profit for the month of May = 1,000 * ($11 - $6.06) = $4,940