Hartwell Products Company uses a perpetual inventory system. For 2008 and 2009, Hartwell has the following data:
Question:
Hartwell Products Company uses a perpetual inventory system. For 2008 and 2009, Hartwell has the following data:
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Required:
1. For each year, compute cost of goods sold, the cost of ending inventory, and gross margin using FIFO.
2. For each year, compute cost of goods sold, the cost of ending inventory, and gross margin using LIFO.
3. For each year, compute cost of goods sold, the cost of ending inventory, and gross margin using the average cost method. (Use four decimal places for per unit calculations and round all other numbers to the nearest dollar.)
4. Which method would result in the lowest amount paid for taxes?
5. Which method produces the most realistic amount for income? For inventory? Explain your answer.
6. Compute Hartwell's gross profit ratio and inventory turnover ratio under each of the three inventory costing methods. How would the choice of inventory costing method affect theseratios?
Inventory Turnover RatioThe inventory turnover ratio is a ratio of cost of goods sold to its average inventory. It is measured in times with respect to the cost of goods sold in a year normally. Inventory Turnover Ratio FormulaWhere,... Ending Inventory
The ending inventory is the amount of inventory that a business is required to present on its balance sheet. It can be calculated using the ending inventory formula Ending Inventory Formula =...
Step by Step Answer:
1 Under the FIFO method cost of goods sold is 63300 and 72200 for 2008 and 2009 respectively Ending inventory is 28800 and 12400 for 2008 and 2009 res...View the full answer
Cornerstones of Financial and Managerial Accounting
ISBN: 978-0324787351
1st Edition
Authors: Rich Jones, Mowen, Hansen, Heitger
