S inventory petual inventory system, uses a LIFO flow assumption, a AE year-end,
ID: 2602404 • Letter: S
Question
S inventory petual inventory system, uses a LIFO flow assumption, a AE year-end, the ties has been in business for more than 50 years. The company mainsainsa cost of goods sold and inventory are adjusted to reflect per procedures A raitroad strike has delayed the arrival of purchases o ordered during the past several months of pecialties has not been able to replenish its inventories as merchandise is sold. At December 22, one product a ing unit costs: Purchase Date Nov. 14. 1958 Apr. 12, 1959 Available for sale at Dec. 22, 2011-, n·n n n n·n Quantity Unit Cost Total Cost s6 3,000 24,009 Jackson Specialties has another 8,000 units of this product on order at the current wholesale cost of $30 per unit. Because of the railroad strike, however, these units have not yet arrived (the terms of purchase are FO.B. destination). Jackson Specialties also has an order from a customer who wants to paurchase 4,000 units of this product at the retail sales price of 347 per unit. Jackson Specialties intends to make this sale on December 30, regardless of whether the 8,000 units on order arrive by this date. (The 4,000-unit sale will be shipped by truck, F.O.B. shipping point. Instructions a. Are the units in inventory really more 'han 50 years old? Explain. b. Prep are a schedule showing the sales revenuo, cost of goods sold, and gross profit that will realt this sale on December 30, assuming that the 8,000 units currently on order (1) arrive before me in the following year. (In each compstation, show from year-end and (2) do not arrive until some ti the number of units comprising the cost of goods sold and their related per-unit costs. Comment on these results Might management be wise to delay this sale by a few days? Explain d.Explanation / Answer
a. Since company is following LIFO method to value inventory, everytime new stock purchased are sold and the left quantity would be the oldest.
Hence the stock available is really oldest.
b. 8000 units arrived
Sales Revenue: (47*4000)- 188000
COGS : (30*4000)- 120000
Gross Profit- 68000
If 8000 units not arrived
Sales Revenue : 188000
COGS:
(8*4000) 32000
(6*4000) 24000
Gross Profit: 132000
C. Company will be on profit to clear old stock firdt.
D. No. Because clearing old stock is profitable.
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