7 Assignment Questions 7-10 (of 10) C7-1 Accounting for Changing Inventory Costs
ID: 2549677 • Letter: 7
Question
7 Assignment Questions 7-10 (of 10) C7-1 Accounting for Changing Inventory Costs lLO 73, LO 751 In October, Nicole eliminated all existing inventory of cosmetic tems. The trouble of ordering and tracking each product line had exceeded the profits earned. In December, a supplier asked her to sell a prepackaged spa kit. Feeling she could manage a single produc lIne. Nicole agreed. Nicole's Getaway Spa (NGS) would make monthly purchases from the supplier at a cost that included production costs and a transportation charge. NGS would keep track of its new inventory using a perpetual Inventory system. On December 31, NGS purchased 25 units at a total cost of $5.80 per unit Nicoie purchased 30 more units at $7.80 in February. In March, Nicole purchased 15 units at $9.80 per unit In May, 60 units were purchased at $9.60 per unit. In June. NGS sold 60 units at a selling price of $11.80 per unit and 55 units at $11.20 per unit References nting for Changing Invento CC74 A Costs (LO 7-3, LO 7-5)Explanation / Answer
2. Compute the cost of goods sold available for sale, cost of goods sold, and cost of ending inventory using the first-in, first-out(FIFO) method.
FIFO (PERPETUAL)
Units
Cost per unit
Total
Beginning inventory
25
5.80
145
Purchases
February
30
7.80
234
March
15
9.80
147
May
60
9.60
576
Net purchases
105
957
Goods available for sale
1102
Cost of goods sold
Units from beginning inventory
25
5.80
145
Units from February purchases
30
7.80
234
Units from March purchases
15
9.80
147
Units from May purchases
45
9.60
432
Total cost of goods sold
958
Ending inventory
15
9.60
144
3. Calculate inventory turn-over ratio
Inventory Turnover Ratio
Numerator
958
=
6.60 times
Denominator
145
FIFO (PERPETUAL)
Units
Cost per unit
Total
Beginning inventory
25
5.80
145
Purchases
February
30
7.80
234
March
15
9.80
147
May
60
9.60
576
Net purchases
105
957
Goods available for sale
1102
Cost of goods sold
Units from beginning inventory
25
5.80
145
Units from February purchases
30
7.80
234
Units from March purchases
15
9.80
147
Units from May purchases
45
9.60
432
Total cost of goods sold
958
Ending inventory
15
9.60
144
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