Principles of Financial Accounting.
24th Edition
ISBN: 9781260158601
Author: Wild
Publisher: MCG
expand_more
expand_more
format_list_bulleted
Videos
Question
Chapter 6, Problem 5BTN
1.
To determine
Compute the company’s inventory turnover and its days’ sales in inventory under (a) current conditions and (b) proposed conditions.
2.
To determine
Evaluate and comment on the merits of their proposal given your analysis for part, and identify any concerns regarding about the proposal.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Dream Corporation is trying to improve its inventory control system and has installed an online computer at its retail stores. Howe anticipates sales of 126,000 units per year, an ordering cost of P4 per order, and carrying costs of P1.008 per unit. The following year, the company. learns it can reduce ordering costs to P1 per order but that carrying costs will stay the same at P1.008 per unit. What is the total cost of inventory to be expected?
a. Calculate the average aggregate inventory value.b. Calculate the inventory turnover.c. The grocery store operates 52 weeks per year. Calculate the weeks of supply.d. The weekly average inventory listed above cannot change much since the grocery store is limited in storage capacity, and can therefore assumed to remain constant over time. The store has calculated that having less than 3 weeks of supply will create problems keeping stock available for clients. What annual cost of goods sold will bring about this condition (3 weeks of supply)?e. The grocery store is increasingly popular and management has calculated that, on average, the cost of goods sold increase by $5 million per year, reflecting better sales. How many years will it take for the grocery store to require expansion?
Neat Logos buys logo-imprinted merchandise and then sells it to university bookstores. Sales are expected to be
$2,009,000 in September, $2,250,000 in October, $2,378,000 in November, and $2,560,000 in December. Neat Logos sets its prices to earn an average 30% gross profit on sales revenue. The company does not want inventory to fall below $440,000 plus 10% of the next month's cost of goods sold.
Prepare a cost of goods sold, inventory, and purchases budget for the months of October and November.
Chapter 6 Solutions
Principles of Financial Accounting.
Ch. 6 - Perpetual: Assume that Marvel uses a perpetual...Ch. 6 - Perpetual: Assume that Marvel uses a perpetual...Ch. 6 - Perpetual and Periodic: Assume that Marvel uses a...Ch. 6 - Periodic: Assume that Marvel uses a periodic FIFO...Ch. 6 - Prob. 5MCQCh. 6 - A company has cost of goods sold of 85,000 and...Ch. 6 - Describe how costs flow from inventory to cost of...Ch. 6 - Where is the amount of merchandise inventory...Ch. 6 - If costs are declining, will the LIFO or FIFO...Ch. 6 - If inventory errors are said to correct...
Ch. 6 - Prob. 5DQCh. 6 - What is the meaning of market as it is used in...Ch. 6 - What factors contribute to (or cause) inventory...Ch. 6 - When preparing interim financial statements, what...Ch. 6 - Prob. 9DQCh. 6 - Prob. 10DQCh. 6 - Prob. 11DQCh. 6 - Prob. 12DQCh. 6 - Inventory ownership Homestead Crafts, a...Ch. 6 - Prob. 2QSCh. 6 - Computing goods available for sale Wattan Company...Ch. 6 - A company reports the following beginning...Ch. 6 - Perpetual: Inventory costing with FIFO P1 A...Ch. 6 - Perpetual: Inventory costing with FIFO P1 A...Ch. 6 - Perpetual: Inventory costing with FIFO P1 A...Ch. 6 - Perpetual: Inventory costing with FIFO P1 A...Ch. 6 - Perpetual: Inventory costing with FIFO P1 A...Ch. 6 - Perpetual: Assigning costs with FIFO Trey Monson...Ch. 6 - Perpetual: Assigning costs with FIFO P1 Trey...Ch. 6 - Perpetual: Assigning costs with FIFO P1 Trey...Ch. 6 - Perpetual: Assigning costs with FIFO P1 Trey...Ch. 6 - Perpetual: Assigning costs with FIFO P1 Trey...Ch. 6 - Perpetual: Assigning costs with FIFO P1 Trey...Ch. 6 - Perpetual: Assigning costs with FIFO P1 Trey...Ch. 6 - Perpetual: Assigning costs with FIFO P1 Trey...Ch. 6 - Prob. 18QSCh. 6 - Prob. 19QSCh. 6 - Prob. 20QSCh. 6 - Analyzing inventory Endor Company begins the year...Ch. 6 - Prob. 22QSCh. 6 - Prob. 23QSCh. 6 - Prob. 1ECh. 6 - Inventory costs Walberg Associates, antique...Ch. 6 - Perpetual: Inventory costing methods P1 Laker...Ch. 6 - Question: Laker Company reported the following...Ch. 6 - Prob. 5ECh. 6 - Prob. 6ECh. 6 - Perpetual: Inventors- costing methodsFIFO and...Ch. 6 - Question: Refer to the information in Exercise...Ch. 6 - Question: Refer to the information in Exercise 6-7...Ch. 6 - Lower of cost or market Martinez Companys ending...Ch. 6 - Prob. 11ECh. 6 - Prob. 12ECh. 6 - Prob. 13ECh. 6 - Periodic: Cost flow assumptions Lopez Company...Ch. 6 - Periodic: Cost flow assumptions Floras Gifts...Ch. 6 - Prob. 16ECh. 6 - Estimating ending inventorgross profit method On...Ch. 6 - Alternative cost flows Warnerwoods Company uses a...Ch. 6 - Perpetual: Alternative cost flows P1 Warnerwoods...Ch. 6 - Alternative cost flows Montoure Company uses a...Ch. 6 - Perpetual: Alternative cost flows P1 Montoure...Ch. 6 - Prob. 5APCh. 6 - Analysis of inventory errors A2 Navajo Company's...Ch. 6 - Prob. 7APCh. 6 - Periodic: Income comparisons and cost flows A1 P3...Ch. 6 - Prob. 9APCh. 6 - Prob. 10APCh. 6 - Alternative cost flows Ming Company uses a...Ch. 6 - Perpetual: Alternative cost flows P1 Ming Company...Ch. 6 - Perpetual: Alternative cost flows Aloha Company...Ch. 6 - Prob. 4BPCh. 6 - Prob. 5BPCh. 6 - Analysis of inventory errors A2 Hallam Company's...Ch. 6 - Prob. 7BPCh. 6 - Periodic: Income comparisons and cost flows A1 P3...Ch. 6 - Retail inventory method The records of Macklin Co....Ch. 6 - Prob. 10BPCh. 6 - SERIAL PROBLEM Business Solutions P2 A3 This...Ch. 6 - Prob. 1AACh. 6 - Prob. 2AACh. 6 - Prob. 3AACh. 6 - ETHICS CHALLENGE Golf Challenge Corp. is a retail...Ch. 6 - COMMUNICATING IN PRACTICE You are a financial...Ch. 6 - Prob. 3BTNCh. 6 - Prob. 5BTN
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Pedee Companys inventory turnover in days is 80 days. Which of the following actions could help to improve that ratio? a. Increase the sales price. b. Increase manufacturing costs. c. Reduce the cost of goods sold. d. Reduce average inventory. e. All of these.arrow_forwardClick the Chart sheet tab. On the screen is a column chart showing ending inventory costs. During a deflationary period, which bar (A, B, or C) represents FIFO costing, which represents LIFO costing, and which represents weighted average? Explain your reasoning. On January 4 following year-end, Rio Enterprises received a shipment of 60 units of product costing 580 each. These units had been ordered by Del in December and had been shipped to him on December 27. They were shipped FOB shipping point. Revise the FIFOLIFO3 worksheet to include this shipment. Preview the printout to make sure that the worksheet will print neatly on one page, and then print the worksheet. Save the completed file as FIFOLIFOT. Using the FIFOLIFO3 file, prepare a 3-D bar (stacked) chart showing the cost of goods sold and ending inventory under each of the four inventory cost flow assumptions. No Chart Data Table is needed. Use the values in the Calculations Section of the worksheet for your chart. Enter your name somewhere on the chart. Save the file again as FIFOLIFO3. Print the chart.arrow_forwardCarpetland salespersons average 8,000 per week in sales. Steve Contois, the firms vice president, proposes a compensation plan with new selling incentives. Steve hopes that the results of a trial selling period will enable him to conclude that the compensation plan increases the average sales per salesperson. a. Develop the appropriate null and alternative hypotheses. b. What is the Type I error in this situation? What are the consequences of making this error? c. What is the Type II error in this situation? What are the consequences of making this error?arrow_forward
- Ethics and Revenue Recognition Alan Spalding is CEO of a large appliance wholesaler. Alan is under pressure from Wall Street Analysts to meet his aggressive sales revenue growth projections. Unfortunately, near the end of the year he realizes that sales must dramatically improve if his projections are going to be met. To accomplish this objective, he orders his sales force to contact their largest customers and offer them price discounts if they buy by the end of the year. Alan also offered to deliver the merchandise to a third-party warehouse with whom the customers could arrange delivery when the merchandise was needed. Required: Do you believe that revenue from these sales should be recognized in the current year? Why or why not?arrow_forwardPietro expects to produce 50,000 units and sell 49,300 units. Beginning inventory of finished goods is 42,500, and ending inventory of finished goods is expected to be 34,000. Required: 1. Prepare a statement of cost of goods sold in good form. 2. What if the beginning inventory of finished goods decreased by 5,000? What would be the effect on the cost of goods sold?arrow_forwardNote that Barbaras Bistro in Figure 1-2 prepares monthly performance reports. Do you think that it would be a good idea for Barbara to switch to just an annual performance report in an effort to reduce its accounting costs?arrow_forward
- Ottis, Inc., uses 640,000 plastic housing units each year in its production of paper shredders. The cost of placing an order is 30. The cost of holding one unit of inventory for one year is 15.00. Currently, Ottis places 160 orders of 4,000 plastic housing units per year. Required: 1. Compute the annual ordering cost. 2. Compute the annual carrying cost. 3. Compute the cost of Ottiss current inventory policy. Is this the minimum cost? Why or why not?arrow_forwardThe Home Depot is a leading specialty retailer of hardware and home improvement products and is the second-largest retail store chain in the United States. It operates large warehouse-style stores. Despite declining sales and difficult economic conditions in 20X1 and 20X2, The Home Depot continued to invest in new stores. The following table provides summary hypothetical data for The Home Depot. REQUIRED a. Use the preceding data for The Home Depot to compute average revenues per store, capital spending per new store, and ending inventory per store in 20X2. b. Assume that The Home Depot will add 100 new stores by the end of Year +1. Use the data from 20X2 to project Year +1 sales revenues, capital spending, and ending inventory. Assume that each new store will be open for business for an average of one-half year in Year +1. For simplicity, assume that in Year +1, Home Depots sales revenues will grow, but only because it will open new stores.arrow_forwardGigasales Department Store Income Statement For the Year Ended December 31, 2022 Net sales $700,000 Cost of goods sold 560,000 Gross profit 140,000 Operating expenses Selling expenses $100,000 Administrative expenses 20,000 120,000 Net income $ 20,000 Karen believes the problem lies in the relatively low gross profit rate of 20%. Reece believes the problem is that operating expenses are too high. Karen thinks the gross profit rate can be improved by making two…arrow_forward
- Karen's retail store sells apparel. The store is in the third year of operations and is struggling financially. Part of the problem is that the cost of inventory has increased. The store assigns inventory costs using LIFO. A loan agreement with the bank requires the store to maintain a certain profit margin. Karen is reviewing the current year financial statements and sees that results are not favorable. The only way that the store can meet the required profit margin is to change inventory costing from LIFO to FIFO. Karen redoes the financial statements using FIFO and submits them to the bank without disclosing the change. How is it that FIFO improves the profit of the store? Did Karen make a good ethical choice by changing to FIFO? Why or why not? What alternatives did Karen have in this situation?arrow_forward(Efficiency analysis) Baryla Inc. manufactures high quality decorator lamps in a plant located in eastern Tennessee. Last year the firm had sales of $103 million and a gross profit margin of 35 percent. a. How much inventory can Baryla hold and still maintain an inventory turnover ratio of at least 6.2 times? b. Currently, some of Baryla's inventory includes$1.9 million of outdated and damaged goods that simply remain in inventory and are not salable. What inventory turnover ratio must the good inventory maintain in order to achieve an overall turnover ratio of at least 6.2 (including the unsalable items)? a. How much inventory can Baryla hold and still maintain an inventory turnover ratio of at least 6.2times? The amount of inventory that Baryla can hold is $____million. (Round to one decimal place.) b. Currently, some of Baryla's inventory includes $1.9 million of outdated and damaged goods that simply remain in inventory and are not salable. What inventory…arrow_forwardBlock, S., Hirt, G., & Danielsen, B. (2017). Foundations of Financial Management. New York, NY: McGraw-Hill Education. 16th edition. Chapter 7 - Problem #14 Fisk Corporation is trying to improve its inventory control system and has installed an online computer at its retail stores. Fisk anticipates sales of 49,000 units per year, an ordering costs of $8 per order, and carrying costs of $1.60 per unit. In the second year, Fisk Corporation finds that it can reduce ordering costs to $2 per order but that carrying costs stay the same at $1.60 per unit. Also, volume remains at 49,000 units per year. A. What is the economica ordering quantity? B. How many orders will be placed during the year? C. What will the average inventory be? D. What is the total costs of ordering and carrying inventory? Thank you in advance!arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Century 21 Accounting Multicolumn JournalAccountingISBN:9781337679503Author:GilbertsonPublisher:Cengage
Cornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage Learning
Essentials of Business Analytics (MindTap Course ...StatisticsISBN:9781305627734Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. AndersonPublisher:Cengage Learning
Excel Applications for Accounting PrinciplesAccountingISBN:9781111581565Author:Gaylord N. SmithPublisher:Cengage Learning
EBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENT
Century 21 Accounting Multicolumn Journal
Accounting
ISBN:9781337679503
Author:Gilbertson
Publisher:Cengage
Cornerstones of Cost Management (Cornerstones Ser...
Accounting
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Cengage Learning
Essentials of Business Analytics (MindTap Course ...
Statistics
ISBN:9781305627734
Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson
Publisher:Cengage Learning
Excel Applications for Accounting Principles
Accounting
ISBN:9781111581565
Author:Gaylord N. Smith
Publisher:Cengage Learning
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:9781337514835
Author:MOYER
Publisher:CENGAGE LEARNING - CONSIGNMENT
Inventory management; Author: The Finance Storyteller;https://www.youtube.com/watch?v=DZhHSR4_9B4;License: Standard Youtube License