2293 Chapter 7 Textbook Solutions 292

2293 Chapter 7 Textbook Solutions 292 - Chapter 7 Textbook...

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Unformatted text preview: Chapter 7 Textbook Solutions 7-17 a) # Units Amount Cost/unit July 1 Beg Inv 6,000 $60,000 $10 3 Purchase 3,000 $36,000 $12 7 Sale 4,000 15 Sale 2,000 23 Purchase 4,000 $64,000 $16 29 Sale 3,500 1. FIFO COGS = (4,000 x $10) + (2,000 x $10) + (3,000 x $12) + (500 x $16) = $104,000 2. Moving Average COGS Jul 7 sale = ($96,000 / (9,000 units) x 4,000 = $42,667 Jul 15 sale = ($96,000 - $42,667) / 5,000) x 2,000 = $21,333 Jul 29 sale = ($96,000 - $42,667 - $21,333 + $64,000) / 7,000) x 3,500 = $48,000 Total moving average COGS = $42,667 + $21,333 + 48,000 = $112,000 b) FIFO cost flow assumption produces the greater net income, since the higher cost goods purchased more recently remain in inventory under FIFO. 7-18 a) # Units Amount Cost/unit July 1 Beg Inv 6,000 $60,000 $10 3 Purchase 3,000 $36,000 $12 7 Sale 4,000 15 Sale 2,000 23 Purchase 4,000 $64,000 $16 29 Sale 3,500 $160,000 FIFO COGS = (4,000 x $10) + (2,000 x $10) + (3,000 x $12) + (500 x $16) = $104,000 Average COGS = ($160,000 / (6,000 + 3,000 + 4,000) = $12.31 $12.31 x 9,500 units sold = $116,923 b) FIFO produces the greater net income, since the higher cost goods purchased more recently remain in inventory under FIFO. 7-19 a) Average Cost: Cost Clock No. 423 $2,150 424 4,500 425 4,400 426 2,400 427 3,720 428 1,930 $19,100/6 clocks = $3,183.33 per clock COGS expense = 4 clocks x $3,183.33 = $12,733.33 Ending inventory = 2 clocks x $3,183.33 = $ 6,366.67 $19,100.00 Specific Identification: COGS expense = $2,150 + 4,400 + 2,400 + 1,930 = $10,880 Ending inventory = $4,500 + 3,720 = 8,220 $19,100 b) Average cost is not an appropriate method to use in this situation as the clocks have such a wide range of costs, from $1,930 to $4,500, that the average cost of $3,183.33 is not representative of most of the inventory. In fact, none of the six clocks have a cost within 10% of this average. Also, as the clocks can be separately identified and are few in number, specific identification is feasible and cost effective....
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This note was uploaded on 09/25/2010 for the course FMGT FMGT 2293 taught by Professor Hamere. during the Summer '09 term at Langara.

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2293 Chapter 7 Textbook Solutions 292 - Chapter 7 Textbook...

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