Hello!Below are two accounting schedules and a question related to them.I do have the answer to the question (included below), but I don't understand why it's 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) ($ Millions) Exhibit 1: Luxor Cosmetics Summary of Selected Historical Data ($ Millions) Schedule B: Statements of Cost of Goods Manufactured and Sold Schedule A: Inventory Movement Expressed in Nail Wholesale Selling Prices (WSP) Lipstick Polish Creams Variable Manufacturing Costs for 2008 $16.8 $10.5 $ 2.8 Nail Fixed Manufacturing Costs for 2008 1.0 07 0.3 Lipstick Polish Creams Cost of Goods Manufactured in 2008 17.B 11.2 3.1 Inventory at 12/31/2007 $ 9.5 $ 6.5 $ 1.0 Cost of Inventory on Hand 12/31/2007 8.0 4.6 0.6 Budgeted Sales (and Production) 2008 21.0 15.0 5.5 Cost of Goods Available for Sale in 2008 25.B 15.8 3.7 Goods Available for Sale in 2006 30.5 21.5 6.6 Cost of Inventory on Hand 12/31/2008 9.7 63 0.6 Actual Sales 2008 19.0 13.0 $ 95 $ 31 5.6 Cost of Goods Sold for 2008 $16.1 Inventory at 12/31/2008 11.5 1.0 $ 3.0 Budgeted Sales (and Production) 2009 Variable Manufacturing Costs for 2009 $17.0 $ 9.8 20.0 14.0 6.0 Fixed Manufacturing Costs for 2009 1.0 0.7 10.3 Goods Available for Sale in 2009 31.5 2.5 7.0 Cost of Goods Manufactured in 2009 18.0 10.5 3.3 Actual Sales 2009 18.0 11.5 6.0 Cost of Inventory on Hand 12/31/2008 9.7 63 0.6 Inventory at 12/31/2009 13.5 11.0 1.0 Cost of Goods Available for Sale in 2009 27.7 16.8 3.9 Budgeted Sales (and Production) 2010 18.0 11.6 6.6 Cost of Inventory on Hand 12/31/2009 12.2 82 0.6 Goods Available for Sale in 2010 31.5 22 6 7.6 Cost of Goods Sold for 2009 $15.5 $ 8.6 $ 3.3 Actual Sales 2010 165 11.2 6.4 Inventory at 12/31/2010 $15.0 $11.4 $1.2 Variable Manufacturing Costs for 2010 $15.3 $93 $3.3 Fixed Manufacturing Costs for 2010 1.0 0.6 0.4 Cost of Goods Manufactured in 2010 16.3 9 9 3.7 Cost of Inventory on Hand 12/31/2009 12.2 82 0.6 Cost of Goods Available for Sale in 2010 28 5 18.1 4.3 Cost of Inventory on Hand 12/31/2010 13.6 9.6 0.7 Cost of Goods Sold for 2010 $14.9 $ 85 $ 3.6 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
