Sutton Mirrors uses sliver to produces its mirrors. Sutton anticipates it will need to purchase 1,000 kilograms of sliver in july 2020 to make enough mirrors to meet its fourth quater sales demand. To hedge against the risk of rising sliver prices, on June 1 2022, Sutton enters into a forward contract with a third party intermediary to buy 1,000 kilogram of sliver at the current spot price of $500 per kilogram. It deasignates the contract as a cash flow hedge of the anticipated sliver purchase. The contract will settle by an exchange of cash with the intermediary based on the spot price on the settlement date. On July 1, 2022 the price of sliver was $525 per kilogram, and on that date Sutton purchased 1,000 kiligram of sliver and settled the forward contract. Subsequently, Sutton used the purcahsed sliver to make mirrors. Sutton sold its mirrors during the fourth quarter of 2022 for 1,500,000, and the toltal value of the inventory, which includes the cost of the silver purcahse made on july 1, 2022 is 800,000. After taking into account the effect of cash flow hedge, the cost of good sold for the fourth quarter sales would be:

$775,000

$825,000

$800,000

$1, 475,000