Question
Bodom Ltd. sells a popular guitar called the Alexi Custom. The guitar is in high demand and Bodom Ltds supplier has been gradually increasing the
Bodom Ltd. sells a popular guitar called the Alexi Custom. The guitar is in high demand and Bodom Ltds supplier has been gradually increasing the price of this product. Using the following information about the inventory for this guitar, calculate the number of units sold in the year. Then, use the information to calculate the cost of goods sold and cost of ending inventory for the year using the first-in, first-out method (FIFO) and then using the weighted average cost method (WACM). Finally, please answer the question listed at the end in Requirement 6. For Requirements 4 & 5, please show your calculations as partial marks may be available.
Note: When calculating your WACM items, please round to the nearest dollar for your WACM unit cost and then continue with your calculation. Round all final answers to the nearest dollar. Answers with minor rounding issues will still be marked correct.
Requirement 1: Calculate number of units sold: Remember: Beginning Inventory (units) + Units Purchased Units Sold = Ending Inventory (units)
Requirement 2: Calculate FIFO COGS:
Requirement 3: Calculate FIFO Ending Inventory:
Requirement 4: Calculate WACM COGS:
Requirement 5: Calculate WACM Ending Inventory:
Requirement 6: If managements goal is to maximize net income, which inventory costing method should it choose?
Beginning inventory - Jan. 1 Purchase - April 5 Purchase - August 5 Sales (for the year) Ending inventory - Dec. 31 Units Cost per (Guitars) Unit Total Cost 75 $ 600 $ 45,000 125 $ 800 $ 100,000 150 $ 1,200 $ 180,000 ? ? ? 120
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