One Stop Electrical Shop are merchandisers of household fixtures & fittings. The business began the last quarter of 2020 (October to December) with 25 Starburst Wall Clocks at a total cost of $153,000. The following transactions took place during the quarter. October 10 100 clocks were purchased on account at a cost of $6,225 each. In addition, One Stop paid $120 cash on each clock to have the inventory shipped from the vendor’s warehouse to their warehouse October 31 During the month 90 clocks were sold at a price of $8,300 each. (20 of these clocks sold were on account to a long-standing customer of the business) November 1 A new batch of 60 clocks was purchased at a total cost of $406,500 November 10 5 of the clocks purchased on November 1 were returned to the supplier, as they were damaged November 30 The sales for November were 58 clocks which yielded total sales revenue of $498,800 December 2 Owing to increased demand, a further 110 clocks were purchased at a cost of $7,400 each and these were subject to a trade discount of 2% each. December 6 Kimoya Rennie, a customer to whom 8 clocks were sold at the start of the first business day in November, returned 2 of the clocks, as they did not match her specifications. December 31 117 clocks were sold during December at a unit selling price of $9,220. December 31 An actual inventory count was carried out which revealed that there were 22 Starburst wall clocks in the store room. Unless otherwise stated, assume that all purchases are on account and all sales are for cash.
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
One Stop Electrical Shop are merchandisers of household fixtures & fittings. The business began the
last quarter of 2020 (October to December) with 25 Starburst Wall Clocks at a total cost of $153,000.
The following transactions took place during the quarter.
October 10 100 clocks were purchased on account at a cost of $6,225 each. In addition,
One Stop paid $120 cash on each clock to have the inventory shipped from
the vendor’s warehouse to their warehouse
October 31 During the month 90 clocks were sold at a price of $8,300 each. (20 of these
clocks sold were on account to a long-standing customer of the business)
November 1 A new batch of 60 clocks was purchased at a total cost of $406,500
November 10 5 of the clocks purchased on November 1 were returned to the supplier, as
they were damaged
November 30 The sales for November were 58 clocks which yielded total sales revenue of
$498,800
December 2 Owing to increased demand, a further 110 clocks were purchased at a cost of
$7,400 each and these were subject to a trade discount of 2% each.
December 6 Kimoya Rennie, a customer to whom 8 clocks were sold at the start of the first
business day in November, returned 2 of the clocks, as they did not match her
specifications.
December 31 117 clocks were sold during December at a unit selling price of $9,220.
December 31 An actual inventory count was carried out which revealed that there were 22
Starburst wall clocks in the store room.
Unless otherwise stated, assume that all purchases are on account and all sales are for cash.
Required:
(A) Prepare a perpetual inventory record for this merchandise, using the last in, first out (LIFO)
method of
the value of ending inventory.
(B) Given that selling, distribution and administrative costs for the quarter were $77,300, $42,105 and
$111,830 respectively, prepare an income statement for One Stop Electrical Shop for the period
ended December 31, 2020
(C) State the
assuming the company uses a: - Periodic inventory system
- Perpetual Inventory System
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