Use the following information to complete this exercise: sales, 850 units for $2

Question

Use the following information to complete this exercise: sales, 850 units for $21,600; beginning inventory, 600 units; purchases, 700 units; ending inventory, 450 units; and operating expenses, $7,600. Required: 1. Complete the table for each situation. In Situations A and B (costs rising), assume the following: beginning inventory, 600 units at $10 = $6,000; purchases, 700 units at $12 = $8,400. In Situations C and D (costs falling), assume the opposite; that is, beginning inventory, 600 units at $12 = $7,200; purchases, 700 units at $10 = $7,000. Use periodic inventory procedures.

Explanation / Answer

1 situation A & B Units Rate per unit $ Amount $ Sales   ( A ) 850           25.41          21,600 Cost of goods sold; Beginning inventory 600 10             6,000 Add: Purchases 700 12             8,400 Less: ending inventory 450 12           (5,400) Cost of goods sold ( B )             9,000 Gross incoem ( A ) - ( B)          12,600 2 situation C & D Units Rate per unit $ Amount $ Sales   ( A ) 850           25.41          21,600 Cost of goods sold; Beginning inventory 600 12             7,200 Add: Purchases 700 10             7,000 Less: ending inventory 450 10           (4,500) Cost of goods sold ( B )             9,700 Gross incoem ( A ) - ( B)          11,900 Note: Here it is assumed that we follows FIFO method of inventory with periodic concept.

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