CC$7-1$ Accounting for Changing Inventory Costs $[$LO$7-3,$ LO$7-5]$

In October, Nicole of Nicole's Getaway Spa $($NGS$)$ eliminated all existing inventory of cosmetic items. The trouble of ordering and

tracking each product line had exceeded the profits earned. In December, a supplier asked her to sell a prepackaged spa kit. Feeling

she could manage a single product line, Nicole agreed. NGS would make monthly purchases from the supplier at a cost that included

production costs and a transportation charge. The spa would use a perpetual inventory system to keep track of its new inventory.

On December $31,$ NGS purchased $10$ units at a total cost of $$8\mathrm{.}00$ per unit. NGS purchased $30$ more units at $$10\mathrm{.}00$ in February, but

returned $5$ defective units to the supplier. In March, NGS purchased $15$ units at $$12\mathrm{.}00$ per unit. In May, $50$ units were purchased at

$$10\mathrm{.}00$ per unit; however, NGS took advantage of a $\frac{2}{10},\frac{n}{30}$ discount from the supplier. In June, NGS sold $50$ units at a selling price

of $$12\mathrm{.}00$ per unit and $35$ units at $$10\mathrm{.}00$ per unit.

Required:

State whether the transportation cost included in each purchase should be recorded as a cost of the inventory or immediately

expensed.

Inventory cost

Immediately expensed

Compute the Cost of Goods Available for Sale, Cost of Goods Sold, and Cost of Ending Inventory using the first$-$in$,$ first$-$out $($FIFO$)$

method. $($Do not round intermediate calculations. Round final answers to the nearest dollar amount.$)$ CC$7-1$ Accounting for Changing Inventory Costs $[$LO$7-3,$ LO$7-5]$CC$7-1$ Accounting for Changing Inventory Costs $[$LO$7-3,$ LO$7-5]$

In October, Nicole of Nicole's Getaway Spa $($NGS$)$ eliminated all existing inventory of cosmetic items. The trouble of ordering and

tracking each product line had exceeded the profits earned. In December, a supplier asked her to sell a prepackaged spa kit. Feeling

she could manage a single product line, Nicole agreed. NGS would make monthly purchases from the supplier at a cost that included

production costs and a transportation charge. The spa would use a perpetual inventory system to keep track of its new inventory.

On December $31,$ NGS purchased $10$ units at a total cost of $$8\mathrm{.}00$ per unit. NGS purchased $30$ more units at $$10\mathrm{.}00$ in February, but

returned $5$ defective units to the supplier. In March, NGS purchased $15$ units at $$12\mathrm{.}00$ per unit. In May, $50$ units were purchased at

$$10\mathrm{.}00$ per unit; however, NGS took advantage of a $\frac{2}{10},\frac{n}{30}$ discount from the supplier. In June, NGS sold $50$ units at a selling price

of $$12\mathrm{.}00$ per unit and $35$ units at $$10\mathrm{.}00$ per unit.

Required:

State whether the transportation cost included in each purchase should be recorded as a cost of the inventory or immediately

expensed.

Inventory cost

Immediately expensed

Compute the Cost of Goods Available for Sale, Cost of Goods Sold, and Cost of Ending Inventory using the first$-$in$,$

In October, Nicole of Nicole$$s Getaway Spa $($NGS$)$ eliminated all existing inventory of cosmetic items. The trouble of ordering and tracking each product line had exceeded the profits earned. In December, a supplier asked her to sell a prepackaged spa kit. Feeling she could manage a single product line, Nicole agreed. NGS would make monthly purchases from the supplier at a cost that included production costs and a transportation charge. The spa would use a perpetual inventory system to keep track of its new inventory.

On December $31,$ NGS purchased $10$ units at a total cost of $$8\mathrm{.}00$ per unit. NGS purchased $30$ more units at $$10\mathrm{.}00$ in February, but returned $5$ defective units to the supplier. In March, NGS purchased $15$ units at $$12\mathrm{.}00$ per unit. In May, $50$ units were purchased at $$10\mathrm{.}00$ per unit; however, NGS took advantage of a $2/10,$ n$/30$ discount from the supplier. In June, NGS sold $50$ units at a selling price of $$12\mathrm{.}00$ per unit and $35$ units at $$10\mathrm{.}00$ per unit.

Required:

$1.$ State whether the transportation cost included in each purchase should be recorded as a cost of the inventory or immediately expensed.

multiple choice

Inventory cost

Immediately expensed

$2.$ Compute the Cost of Goods Available for Sale, Cost of Goods Sold, and Cost of Ending Inventory using the first$-$in$,$ first$-$out $($FIFO$)$ method. $($Do not round intermediate calculations. Round final answers to the nearest dollar amount.$)$

$3-$a$.$ Calculate the inventory turnover ratio, using the inventory on hand at December $31$ as the beginning inventory. $($Do not round intermediate calculations. Round your answer to $1$ decimal place.$)$

$3-$b$.$ The supplier reported that the typical inventory turnover ratio was $7\mathrm{.}9.$ How does NGS$\text{'}$s ratio compare?