Hello! Below are two accounting schedules and a question related to them. I do have the answer to the question (included below), but I dont understand why its the correct answer. Can you please provide guidance/an explanation as to how and why this equation makes sense?
Thanks in advance!
Summary of Selected Historical Data (Continued) (S Millions) Exhibit 1: Luxor Cosmetics Summary of Selected Historical Data (S Millions) Schedule B: Statements of Cost of Goods Manufactured and Sold Nail Lipstick Polish Creams Schedule A: Inventory Movement Expressed in Wholesale Selling Prices (WSP) Variable Manufacturing Costs for 2008 $16.8 $10.5 $28 Fixed Manufacturing Costs for 2008 1.0 0.7 0.3 Nail Cost of Goods Manufactured in 2008 17.8 112 3.1 Lipstick Polish Creams $ 9.5 Cost of Inventory on Hand 12/31/2007 8.0 4.6 0.6 Inventory at 12/31/2007 $6.5 $1.0 Cost of Goods Available for Sale in 2008 15.8 3.7 25.8 5.6 Budgeted Sales (and Production) 2008 21.0 15.0 Cost of Inventory on Hand 12/31/2008 9.7 6.3 0.6 Goods Available for Sale in 2008 30.5 21.5 6.6 S 3.1 Cost of Goods Sold for 2008 $16.1 $9.5 Actual Sales 2008 19.0 13.0 5.6 11.5 8.5 1.0 Inventory at 12/31/2008 Variable Manufacturing Costs for 2009 Fixed Manufacturing Costs for 2009 Cost of Goods Manufactured in 2009 $ 3.0 9.8 $17.0 Budgeted Sales (and Production) 2009 Goods Available for Sale in 2009 20.0 14.0 6.0 1.0 07 0.3 31.5 22.5 7.0 18.0 10.5 33 Actual Sales 2009 18.0 11.5 6.0 Cost of Inventory on Hand 12/31/2008 9.7 6.3 0.6 Inventory at 12/31/2009 Budgeted Sales (and Production) 2010 13.5 11.0 1.0 27.7 Cost of Goods Available for Sale in 2009 16.8 3.9 18.0 11.6 6.6 Cost of Inventory on Hand 12/31/2009 122 8.2 0.6 Cost of Goods Sold for 2009 $ 86 S 3.3 $155 Goods Available for Sale in 2010 31.5 22.6 7.6 Actual Sales 2010 16.5 11.2 6.4 Inventory at 12/31/2010 Variable Manufacturing Costs for 2010 $15.3 9.3 $3.3 $15.0 $1.4 $1.2 Fixed Manufacturing Costs for 2010 1.0 0.4 0.6 Cost of Goods Manufactured in 2010 16.3 9.9 37 Cost of Inventory on Hand 12/31/2009 122 8.2 0.6 28.5 Cost of Goods Availa ble for Sale in 2010 18.1 4.3 Cost of Inventory on Hand 12/31/2010 13.6 9.6 0.7 $ 8.5 $ 3.6 $14.9 Cost of Goods Sold for 2010 Question: Provide the calculation that converts the wholesale selling price (WSP) of the 12/31/2008 lipstick inventory shown as $11.5 million in Schedule A of Exhibit 1 to the "cost" of $9.7 million shown in Schedule B of Exhibit 1 Answer: WSP 2008 11.5/19 *16.1 = 9.7 million
