Question

In: Accounting

VI. Given below is information about cost of goods sold, beginning and ending inventories, and average...

VI. Given below is information about cost of goods sold, beginning and ending inventories, and average accounts payable for Years 3, 4 and 5: Cost of Goods Sold Beginning Inventory Ending Inventory Sales Year 3 $1,895,400 $1,080,000 $540,000 $3,510,000 Year 4 $2,079,000 $540,000 $1,116,000 $3,960,000 Year 5 $2,250,000 $1,116,000 $525,600 $4,500000 Calculate for each year the following: (a) inventory turnover; (b) average number of days that inventory is on hand using 360 days in a year; and (c) gross profit margin rate up to two decimal place.

Solutions

Expert Solution

Answer :

Calculation of ratios :

Year - 3 :

a. Inventory Turnover ratio

= Cost of Goods Sold / Average Inventory

Average Inventory = ($1,080,000 + $540,000) / 2 = $810,000

Inventory Turnover ratio

= $1,895,400 / $810,000

= 2.34 times

b. Average number of days that inventory is on hand

= 360 days / Inventory Turnover ratio

= 360 days / 2.34 times

= 153.85 days

c. Gross profit margin rate

Gross Profit = Sales - Cost of Goods

= $3,510,000 - $1,895,400

= $1,614,600

Gross Profit Margin = Gross Profit / Sales x 100

= $1,614,600 / $3,510,000 x 100

= 46.00%

Year - 4 :

a. Inventory Turnover ratio

= Cost of Goods Sold / Average Inventory

Average Inventory = ($540,000 + $1,116,000) / 2 = $828,000

Inventory Turnover ratio

= $2,079,000 / $828,000

= 2.51 times

b. Average number of days that inventory is on hand

= 360 days / Inventory Turnover ratio

= 360 days / 2.51 times

= 143.43 days

c. Gross profit margin rate

Gross Profit = Sales - Cost of Goods

= $3,960,000 - $2,079,000

= $1,881,000

Gross Profit Margin = Gross Profit / Sales x 100

= $1,881,000 / $3,960,000 x 100

= 47.50%

Year - 5 :

a. Inventory Turnover ratio

= Cost of Goods Sold / Average Inventory

Average Inventory = ($1,116,000 + $525,600) / 2 = $820,800

Inventory Turnover ratio

= $2,250,000 / $820,800

= 2.74 times

b. Average number of days that inventory is on hand

= 360 days / Inventory Turnover ratio

= 360 days / 2.74 times

= 131.39 days

c. Gross profit margin rate

Gross Profit = Sales - Cost of Goods

= $4,500,000 - $2,250,000

= $2,250,000

Gross Profit Margin = Gross Profit / Sales x 100

= $2,250,000 / $4,500,000 x 100

= 50.00%

ekkarill92 answered 1 year ago
Next > < Previous

Related Solutions

Given the following, calculate cost of goods sold: Inventories: Beginning Ending Direct materials $300 $250 Work...
Given the following, calculate cost of goods sold: Inventories: Beginning Ending Direct materials $300 $250 Work in process $400 $200 Finished goods $500 $350 Direct material purchases $4,200 Direct labor $3,000 Manufacturing overhead $5,000
Based on the information below what would the ending inventory and the cost of goods sold...
Based on the information below what would the ending inventory and the cost of goods sold be for Gargleblaster Inc (GI) under the following cost flow assumptions?                                                                           Ending Inventory                  Cost of Goods Sold          1.         LIFO (periodic inventory method)    $                                                                  $                                                    2.         FIFO (periodic inventory method) $ $                                                    3.         LIFO (perpetual inventory method) $ $                                                    4.         FIFO (perpetual inventory method) $ $                                                                                                                                                                    Quantity   Cost per Unit                Total             Beginning Inventory               200 units         $10                             ...
Based on the information below what would the ending inventory and the cost of goods sold...
Based on the information below what would the ending inventory and the cost of goods sold be for Gargleblaster Inc (GI) under the following cost flow assumptions? Ending Inventory                  Cost of Goods Sold 1.         LIFO(periodic inventory method) $ $                                                                       2.         FIFO(periodic inventory method) $                                                                      $                                                                       3.         LIFO (perpetual inventory method) $                                                                   $                                                                       4.         FIFO(perpetual inventory method) $                                                                    $                                                                                                             Quantity   Cost per Unit                 Total             Beginning Inventory 200 units         $10 2,000             January Purchases 300 units         $12 3,600             March Purchases 500 units         $15 7,500             August Purchases 500 units         $15 7,500             December Purchases 200 units         $20 4,000 1,700...
Given the following, calculate cost of goods manufactured: Inventories: Beginning Ending Direct materials $300 $250 Work...
Given the following, calculate cost of goods manufactured: Inventories: Beginning Ending Direct materials $300 $250 Work in process $400 $200 Finished goods $500 $350 Direct material purchases $4,200 Direct labor $3,000 Manufacturing overhead $5,000
Record the net variance closed to cost of goods sold. Record the net variance allocated to ending inventories and Cost of goods sold.
  Patel and Sons Inc. uses a standard cost system to apply factory overhead costs to units produced. Practical capacity for the plant is defined as 50,000 machine hours per year, which represents 25,000 units of output. Annual budgeted fixed factory overhead costs are $250,000 and the budgeted variable factory overhead cost rate is $4 per unit. Factory overhead costs are applied on the basis of standard machine hours allowed for units produced. Budgeted and actual output for the year...
Computing Cost of Goods Sold and Ending Inventory UnderFIFO, LIFO, and Average CostAssume that...
Computing Cost of Goods Sold and Ending Inventory Under FIFO, LIFO, and Average CostAssume that Madden Company reports the following initial balance and subsequent purchase of inventory.Inventory balance at beginning of year 1,560 units @ $150 each $234,000Inventory purchased during the year 2,040 units @ $180 each 367,200Cost of goods available for sale during the year 3,600 units $601,200Assume that 2,400 units are sold during the year. Compute the cost of goods sold for the year and the inventory on...
Calculate the cost of goods sold and ending inventory using weighted average. (Round the weighted average...
Calculate the cost of goods sold and ending inventory using weighted average. (Round the weighted average cost per unit to 2 decimal places, e.g. 5.25 and final answers to 0 decimal places, e.g. 5,250.) Purchases Cost of Goods Sold Balance Date Units Cost Total Units Cost Total Units Cost Total Units Total Cost WA Cost Per unit Apr-01 Beginning Inventory 26 $11 $286 26 $11 $286 Apr-15 52 $13 $676 $ $ 26 $286 52 $676 $ $ Apr-20 29...
From the following? information, calculate the cost of ending inventory and cost of goods sold using...
From the following? information, calculate the cost of ending inventory and cost of goods sold using the? (a) FIFO,? (b) LIFO, and? (c) weighted-average methods. Units Cost January 1 Beginning Inventory 4 $7 March 6 Purchased 6 2 August 9 Purchased 4 9 December 10 Purchased 5 1 The ending inventory reveals eighteight items unsold
Computing Cost of Goods Sold and Ending Inventory Under FIFO, LIFO, and Average Cost Assume that...
Computing Cost of Goods Sold and Ending Inventory Under FIFO, LIFO, and Average Cost Assume that Madden Company reports the following initial balance and subsequent purchase of inventory. Inventory balance at beginning of year 1,820 units @ $150 each $273,000 Inventory purchased during the year 2,380 units @ $180 each 428,400 Cost of goods available for sale during the year 4,200 units $701,400 Assume that 2,800 units are sold during the year. Compute the cost of goods sold for the...
Calculate the cost of goods sold and the cost of ending inventory using the FIFO, LIFO, and average cost methods.
Inventory Costing Methods: Periodic Inventory Systems. (Appendix 6B)Tyler Company has the following information related to purchases and sales of one of its inventory items.DateDescriptionUnits Purchased at CostUnits Sold at RetailSept. 1Beginning inventory20 units @ $510Purchase30 units @ $820Sales40 units @ $1525Purchase25 units at $10Assume that the company uses the periodic inventory system.Required:Calculate the cost of goods sold and the cost of ending inventory using the FIFO, LIFO, and average cost methods. (Note: Use four decimal places for per-unit calculations and...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT