In October, Nicole of Nicole's Getaway Spa (NGS) eliminated all existing inventory of cosmetic items. The trouble of ordering and tracking each prod line had exceeded the profits earned. In December, a supplier asked her to sell a prepackaged spa kit. Feeling she could manage a single product li Nicole agreed. NGS would make monthly purchases from the supplier at a cost that included production costs and a transportation charge. The spa would use a perpetual inventory system to keep track of its new inventory. On December 31, NGS purchased 10 units at a total cost of $6.00 per unit. NGS purchased 30 more units at $8.00 in February, but returned 5. defective units to the supplier. In March, NGS purchased 15 units at $10.00 per unit. In May. 50 units were purchased at $10.00 per unit; however, N took advantage of a 2.00/10, n/30 discount from the supplier. In June, NGS sold 50 units at a selling price of $12.60 per unit and 35 units at $10.60 unit. Required: 1. State whether the transportation cost included in each purchase should be recorded as a cost of the inventory or immediately expensed. OImmediately expensed O Inventory cost 2. Compute the Cost of Goods Available for Sale, Cost of Goods Sold, and Cost of Ending Inventory using the first-in, first-out (FIFO) method. (Do not round intermediate calculations. Round final answers to the nearest dollar amount.) Chart on Cost of goods available for sale Cost of goods sold Cost of ending inventory 3-a. Calculate the inventory turnover ratio, using the inventory on hand at December 31 as the beginning inventory. (Do not round intermediate calculations. Round your answer to 1 decimal place.) Inventory tumover ratio times 3-b. The supplier reported that the typical inventory turnover ratio was 7.9. How does NGS's ratio compare? This implies that it is taking Nicole a slightly amount of time to sell her inventory than her supplier claims is typical.
In October, Nicole of Nicole's Getaway Spa (NGS) eliminated all existing inventory of cosmetic items. The trouble of ordering and tracking each prod line had exceeded the profits earned. In December, a supplier asked her to sell a prepackaged spa kit. Feeling she could manage a single product li Nicole agreed. NGS would make monthly purchases from the supplier at a cost that included production costs and a transportation charge. The spa would use a perpetual inventory system to keep track of its new inventory. On December 31, NGS purchased 10 units at a total cost of $6.00 per unit. NGS purchased 30 more units at $8.00 in February, but returned 5. defective units to the supplier. In March, NGS purchased 15 units at $10.00 per unit. In May. 50 units were purchased at $10.00 per unit; however, N took advantage of a 2.00/10, n/30 discount from the supplier. In June, NGS sold 50 units at a selling price of $12.60 per unit and 35 units at $10.60 unit. Required: 1. State whether the transportation cost included in each purchase should be recorded as a cost of the inventory or immediately expensed. OImmediately expensed O Inventory cost 2. Compute the Cost of Goods Available for Sale, Cost of Goods Sold, and Cost of Ending Inventory using the first-in, first-out (FIFO) method. (Do not round intermediate calculations. Round final answers to the nearest dollar amount.) Chart on Cost of goods available for sale Cost of goods sold Cost of ending inventory 3-a. Calculate the inventory turnover ratio, using the inventory on hand at December 31 as the beginning inventory. (Do not round intermediate calculations. Round your answer to 1 decimal place.) Inventory tumover ratio times 3-b. The supplier reported that the typical inventory turnover ratio was 7.9. How does NGS's ratio compare? This implies that it is taking Nicole a slightly amount of time to sell her inventory than her supplier claims is typical.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:In October, Nicole of Nicole's Getaway Spa (NGS) eliminated all existing inventory of cosmetic items. The trouble of ordering and tracking each produ
line had exceeded the profits eamed. In December, a supplier asked her to sell a prepackaged spa kit. Feeling she could manage a single product line
Nicole agreed. NGS would make monthly purchases from the supplier at a cost that included production costs and a transportation charge. The spa
would use a perpetual inventory system to keep track of its new inventory.
On December 31, NGS purchased 10 units at a total cost of $6.00 per unit. NGS purchased 30 more units at $8.00 in February, but returned 5.
defective units to the supplier. In March, NGS purchased 15 units at $10.00 per unit. In May, 50 units were purchased at $10.00 per unit; however
took advantage of a 2.00/10, n/30 discount from the supplier. In June, NGS sold 50 units at a selling price of $12.60 per unit and 35 units at $10.60 pe
unit.
Required:
1. State whether the transportation cost included in each purchase should be recorded as a cost of the inventory or immediately expensed.
OImmediately expensed
O Inventory cost
2. Compute the Cost of Goods Available for Sale, Cost of Goods Sold, and Cost of Ending Inventory using the first-in, first-out (FIFO) method. (Do not
round intermediate calculations. Round final answers to the nearest dollar amount.)
Chart on
Cost of goods available for sale
Cost of goods sold
Cost of ending inventory.
3-a. Calculate the inventory turnover ratio, using the inventory on hand at December 31 as the beginning inventory. (Do not round intermediate
calculations. Round your answer to 1 decimal place.)
Inventory turnover ratio
times
3-b. The supplier reported that the typical inventory turnover ratio was 7.9. How does NGS's ratio compare?
This implies that it is taking Nicole a slightly
amount of time to sell her inventory than her supplier claims is typical.
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