required information\nthe following information was drawn from the inventory records of alpha company as of…

required information\nthe following information was drawn from the inventory records of alpha company as of december 31, year 2.\nbeginning inventory (purchased in year 1) 380 units @ $5 each\npurchases made in year 2 980 units @ $8 each\nunits sold 1,080 units @ $12 each\nwhich of the following is the amount of the gross margin assuming alpha uses a fifo cost - flow method?\nmultiple choice\n$980\n$320\n$7,500\n$5,460

required information\nthe following information was drawn from the inventory records of alpha company as of december 31, year 2.\nbeginning inventory (purchased in year 1) 380 units @ $5 each\npurchases made in year 2 980 units @ $8 each\nunits sold 1,080 units @ $12 each\nwhich of the following is the amount of the gross margin assuming alpha uses a fifo cost - flow method?\nmultiple choice\n$980\n$320\n$7,500\n$5,460

Answer

Explanation:

Step1: Calculate cost of goods sold (COGS) using FIFO

First, use up the beginning - inventory. The beginning inventory has 380 units at $5 each. The cost of these units is $380\times5 = 1900$. The number of units still needed to account for in COGS is $1080 - 380=700$ units. These 700 units come from the Year - 2 purchases at $8 each, and their cost is $700\times8 = 5600$. So, the total COGS is $1900 + 5600=7500$.

Step2: Calculate total sales revenue

The number of units sold is 1080 at $12 each. So, the sales revenue is $1080\times12 = 12960$.

Step3: Calculate gross margin

Gross margin = Sales revenue - COGS. So, $12960−7500 = 5460$.

Answer:

$5460$