XYZ IncUses the Average Cost Formula in a Perpetual Inventory System

question 23

Multiple Choice

XYZ Inc.uses the average cost formula in a perpetual inventory system. (Use unrounded numbers in your calculations but round to the nearest cent for presentation purposes in your answer.)
If XYZ Inc.was using the FIFO cost formula instead of average, gross profit from the June 8 sale would be

• A)higher.
• B)lower.
• C)the same.
• D)cannot be determined.

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Definitions:

Buffalo Meat

The meat derived from buffaloes, considered a source of protein and widely consumed in certain cultures and countries.

Surplus

The situation in which the quantity of a product supplied exceeds the quantity demanded at the current price; often leads to downward pressure on prices.

Shortage

A situation in which the demand for a product or service exceeds the supply available at a specific price.

Bushels

A measure of volume used primarily for agricultural commodities, varying in size depending on the product measured.