Gross Profit ??? Pls help me to explain following, question, average, method, profit

lc26mizzou

The following question is taken from schweser:

Units Unit Price
Beginning Inventory 709 $2.00
Purchases 556 $6.00
Sales 959 $13.00
SGA Expenses $2,649 per annum

What is gross profit using the weighted average method?

A) $6,213.98.

B) $5,676.00.

C) $6,027.56.


Answer from schweser:

weighted average cost per unit = (709 units)($2/unit) + (556 units)($6/unit) = $4,754 / 1,265units = $3.7581

weighted average COGS = ($3.7581)(959 units) = $3,604.02

Sales = (959 units)($13/unit) = $12,467

Gross profit = Sales − COGS − Expenses = 12,467 − 3,604.02 − 2,649 = $6,213.98

My question is why gross profit = Sales - COGS - Expenses, i thinks it should be: Gross profit = Sales - COGS

Any idea?

AnalystAlan

Goodwill Wrote:
-------------------------------------------------------
> I agree with your concern. They are actually
> asking for the "Operating Profit". However, based
> on the choices and the fact that they gave you the
> SGA expenses, choice A is the best answer in this
> case.

Some cases, they still give more information than you need. In this case, I think they gave wrong question. Agree with your idea, their answers for the "Operating Profit".

SkipE99

I agree with your concern. They are actually asking for the "Operating Profit". However, based on the choices and the fact that they gave you the SGA expenses, choice A is the best answer in this case.