At May 1 2016 Bibby Company had beginning inventory consisting of 200 units with a unit cost of $7. During May the company purchased inventory as follows: 800 units at $7
500 units at $9
The company sold 500 units during the month for $12 per unit. Bibby uses the average cost method. Bibby's gross profit for the month of May is

A) $2167.
B) $2000.
C) $1500.
D) $4333.

1. The total cost of the beginning inventory is 200 x $7 = $1400.
2. The cost of the first purchase is 800 x $7 = $5600.
3. The cost of the second purchase is 500 x $9 = $4500.
4. The total cost of the inventory is $1400 + $5600 + $4500 = $11500.
5. The total number of units is 200 + 800 + 500 = 1500.
6. The average cost per unit is $11500 / 1500 = $7.67.
7. The cost of goods sold is 500 x $7.67 = $3835.
8. The gross profit is ($12 - $7.67) x 500 = $2165.
Therefore, the correct answer is A) $2167.