Exercise PR6-6A Financial & Managerial Accounting Edition 15

Wolsey Industries Inc. Estimated Income Statement For the Year Ended December 31. 20Y3 Sales Cost of goods sold: Direct materials Direct labor Factory overhead Cost of goods sold Gross profit Expenses: Selling expenses: Sales salaries and commissions Advertising Travel Miscellaneous selling expense Total selling expenses Administrative expenses: Office and officers' salaries Supplies Miscellaneous administrative expense Total administrative expenses Total expenses Operating income Contribution margin ratio: Sales Units Unit Variable Cost Variable costs Contribution margin Sales Contribution margin ratio Break-even sales: Fixed costs Sale Price - Unit Variable Cost Unit contribution margin Break-even sales (units Sale price Break-even sales (dollars) For each unit level of sales, enter the total sales dollars and total costs. The chart at right will be plotted as you enter the amounts. After all points are plotted, grab and move the labels provided at the left to identify each area. Units Sales $ Costs $ # ###### ##HU# ## Cost-Volume-Profit Chart ##### ## $1 $1 $1 Sales and Costs -+Sales $ Operating Loss Break-Even Area Point Costs $ Operating Profit SO Area . $- 3,000 6,000 9,000 12,000 15,000 18,000 21,000 24,000 27,000 Units Margin of safety: Sale Price Units Expected sales Break-even point Margin of safety (in dollars) Expected sales Margin of safety (as a percentage of sales) Operating leverage: Unit CM $ Units Contribution margin Operating income Operating leverageDetermine the cost of the inventory on Dec data in columnar form, using the following headings: I method. Press Unit Cost Model Quantity Total Cost the inventory of a particular model comprises one entire purchase plus a portion of in purchase acquired at a different unit cost, use a separate line for each purchase." Determine the cost of the inventory on December 31 by the last-in, first-out method, for the procedures indicated in (1). 3. Determine the cost of the inventory on December 31 by the weighted average cost using the columnar headings indicated in (1). Discuss which method (FIFO or LIFO) would be preferred for income tax pur in periods of (a) rising prices and (b) declining prices. PR 6-6A Lower-of-cost-or-market inventory 1, $39,873 Data on the physical inventory of Ashwood Products Company as of December 31 follow Inventory Market Value per Unit Description Quantity (Net Realizable Value) B12 38 $ 57 E41 18 180 G19 33 126 L88 18 550 N94 400 7 P24 90 18 R66 8 250 T33 140 20 216 15 752 Quantity and cost data from the last purchases invoice of the year and the next-to-the-las pf chases invoice are summarized as follows: Last Next-to-the-Last Purchases Invoice Purchases Invoice Quantity Unit Quantity Unit Description Purchased Cost Purchased Cost B12 30 $ 60 30 $ 59 E41 35 178 20 180 G19 20 128 25 129 L88 10 563 10 560 N94 500 8 500 7 P24 80 22 50 21 R66 S 248 4 260 T33 100 21 100 19 216 10 750 9 745 Instructions Determine the inventory at cost and also at the lower of cost or market applied on an item? item basis, using the first-in, first-out method, Record the appropriate unit costs on the tory sheet, and complete the pricing of the inventory. When there are two different unit is applicable to an item, proceed as follows: 1. Draw a line through the quantity, and insert the quantity and unit cost of the last purchase 2 On the following line, insert the quantity and unit cost of the next-to the-last purchase 3 Total the cost and market columns and insert the lower of the two totals in the LCM The first item on the inventory sheet has been completed as an example