Assume that three identical units of merchandise were purchased during October, as follows: Assume one unit is sold on October 31 for $28. Determine cost of goods sold, gross profit, and ending inventory under the average cost method.

Average Cost Method

An inventory costing method that determines the cost of goods sold and ending inventory based on the weighted average cost of all items available for sale.

Gross Profit

calculates as the difference between revenue and the cost of goods sold, indicating how efficiently a company uses its resources to produce goods.

Ending Inventory

The total value of all inventory, including goods in various stages of production, available at the end of an accounting period.