Applying the Cost of Goods Sold Model Shippington Sales sells a single product.

Question

Applying the Cost of Goods Sold Model

Shippington Sales sells a single product. At the beginning of the year, Shippington had 120 units in stock at a cost of $6 each. During the year, Shippington purchased 850 more units at a cost of $6 each and sold 210 units at $13 each, 250 units at $15 each, and 360 units at $14 each.

Required:

1. Using the cost of goods sold model, what is the amount of ending inventory and cost of goods sold?

2. What is Shippington's gross margin for the year?
$

Explanation / Answer

Answer:1 Ending inventory=150*6=900

COGS=(210+250+360)*$6=4920

Answer:2 Gross margin=Sale-COGS

=[210*13+250*15+360*14]-4920

=11520-4920

=6600

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