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.

Answer 1

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.