Baddeck Antiques Ltd. (Baddeck) sells rare antiques to discriminating clients. Over the years Baddeck has acquired four essentially identical vases from one of the ancient dynasties in China.

The cost of the vases is as follows:

Recently, a customer purchased one of the vases for $32,000.
Required:

a. If Baddeck wanted to minimize its profit on this sale, which of the vases would it have sold to the customer? Calculate gross margin and ending inventory at the end of the period.

b. If Baddeck wanted to maximize its profit on this sale, which of the vases would it have sold to the customer? Calculate gross margin and ending inventory at the end of the period.

c. What is the impact on ending inventory of your choices in (a) and (b)? Under what circumstances might Baddeck’s management want to maximize profit? Under what circumstances might it want to minimize profit? In reality, would it be possible for Baddeck’s management to have the opportunity to manage the financial statements in this way? Explain.

Transcribed Image Text:

Vase A $14,200 Vase B 8,950 Vase C 17,150 Vase D 12,250