ABC Company had 500 units of XYZ in its inventory at a cost of $4 each. It purchased, for $2,800, 300 more units of XYZ. ABC then sold 400 units at a selling price of $10 each, resulting in a gross profit of $1,600. The cost flow assumption used by ABC:

ABC company uses the average cost method

Explanation:

beginning inventory 500 units at $4 = $2,000

purchased 300 units at $9.33 = $2,800

sold 400 units at $10 = $4,000 ⇒ gross profit = $1,600

under LIFO, cost of goods sold = $2,800 + $400 = $3,200, gross profit = $800

under FIFO, cost of goods sold = $1,600, gross profit = $2,400

under average cost, cost of goods sold = ($4,800 / 800) x 400 = $2,400, gross profit = $1,600

whole quiz

1. the sum of all activities involved in getting high-quality products into the marketplace

2.operations

3. the principle of looking at the supply chain as a whole in order to improve the overall flow through the system.

4. produced; performed

5. activities producing tangible products, such as radios, newspapers, buses, and textbooks.

6. activities producing intangible and tangible products, such as entertainment, transportation, and education.

7.   customer focus

8. analyzing a competitor's products to identify desirable improvements

9. the systematic direction and control of the processes that transform resources into finished projects that create value for and provide benefits to consumers.

10. operation management.

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