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Under the perpetual average cost method, the same June data give a total cost of merchandise sold of $90.70 on sales of $190. What is the gross profit?
A$92.00
B$99.30
C$105.00
D$190.00
Answer & Solution
Correct answer: B. $99.30
1. Total sales = 19 units $\times \$10 = \$190.00$.
2. Cost of merchandise sold under average cost = $\$90.70$.
3. Gross profit = $\$190.00 - \$90.70 = \$99.30$.
4. Rule out $\$105.00$: that is the FIFO gross profit, which is higher because FIFO assigns lower costs to sales when prices rise.
_Source: Jonick, Principles of Financial Accounting (CC BY-SA 4.0), §4.1.1 "Perpetual Inventory System", p.118_
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