Perpetual Inventory System: The perpetual inventory system records and updates the inventory after each and every transaction. The inventory balance is updated after each transaction and it is kept up to date at every time. FOB shipping point: FOB shipping point stands for Free On Board shipping point. It is a term for selling the merchandise, under which the delivery of goods is completed when the goods are shipped from the seller’s place. The goods in transit belong to the buyer and buyer bears the cost of transportation after the shipping point. In case of FOB shipping point, the goods in transit should be included in the buyer’s inventory. FOB destination: FOB destination stands for Free On Board destination. It is a term for selling the merchandise, under which the delivery of goods is completed when the goods are reached at buyer’s destination. The goods in transit belong to the seller and seller bears the cost of transportation till the buyer’s destination. In case of FOB destination, the goods in transit should be included in the seller inventory. Requirement 1: To calculate: The amount of sales revenue recognised in the month of December 2019.
Perpetual Inventory System: The perpetual inventory system records and updates the inventory after each and every transaction. The inventory balance is updated after each transaction and it is kept up to date at every time. FOB shipping point: FOB shipping point stands for Free On Board shipping point. It is a term for selling the merchandise, under which the delivery of goods is completed when the goods are shipped from the seller’s place. The goods in transit belong to the buyer and buyer bears the cost of transportation after the shipping point. In case of FOB shipping point, the goods in transit should be included in the buyer’s inventory. FOB destination: FOB destination stands for Free On Board destination. It is a term for selling the merchandise, under which the delivery of goods is completed when the goods are reached at buyer’s destination. The goods in transit belong to the seller and seller bears the cost of transportation till the buyer’s destination. In case of FOB destination, the goods in transit should be included in the seller inventory. Requirement 1: To calculate: The amount of sales revenue recognised in the month of December 2019.
Solution Summary: The author explains the perpetual inventory system, which records and updates the inventory after each and every transaction. The goods in transit belong to the buyer and buyer bears the cost of transportation.
The perpetual inventory system records and updates the inventory after each and every transaction. The inventory balance is updated after each transaction and it is kept up to date at every time.
FOB shipping point:
FOB shipping point stands for Free On Board shipping point. It is a term for selling the merchandise, under which the delivery of goods is completed when the goods are shipped from the seller’s place. The goods in transit belong to the buyer and buyer bears the cost of transportation after the shipping point. In case of FOB shipping point, the goods in transit should be included in the buyer’s inventory.
FOB destination:
FOB destination stands for Free On Board destination. It is a term for selling the merchandise, under which the delivery of goods is completed when the goods are reached at buyer’s destination. The goods in transit belong to the seller and seller bears the cost of transportation till the buyer’s destination. In case of FOB destination, the goods in transit should be included in the seller inventory.
Requirement 1:
To calculate:
The amount of sales revenue recognised in the month of December 2019.
To determine
Concept introduction:
Perpetual Inventory System:
The perpetual inventory system records and updates the inventory after each and every transaction. The inventory balance is updated after each transaction and it is kept up to date at every time.
FOB shipping point:
FOB shipping point stands for Free On Board shipping point. It is a term for selling the merchandise, under which the delivery of goods is completed when the goods are shipped from the seller’s place. The goods in transit belong to the buyer and buyer bears the cost of transportation after the shipping point. In case of FOB shipping point, the goods in transit should be included in the buyer’s inventory.
FOB destination:
FOB destination stands for Free On Board destination. It is a term for selling the merchandise, under which the delivery of goods is completed when the goods are reached at buyer’s destination. The goods in transit belong to the seller and seller bears the cost of transportation till the buyer’s destination. In case of FOB destination, the goods in transit should be included in the seller inventory.
Requirement 2:
To indicate:
The effect of inclusion of all shipments in revenue on various accounts.
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Coronado Fire, Inc. manufactures steel cylinders and nozzles for two models of fire extinguishers: (1) a home fire extinguisher and (2) a
commercial fire extinguisher. The home model is a high-volume (54,000 units), half-gallon cylinder that holds 2 1/2 pounds of multi-
purpose dry chemical at 480 PSI. The commercial model is a low-volume (10,200 units), two-gallon cylinder that holds 10 pounds of
multi-purpose dry chemical at 390 PSI. Both products require 1.5 hours of direct labor for completion. Therefore, total annual direct
labor hours are 96,300 or [1.5 hours x (54,000+10,200)]. Estimated annual manufacturing overhead is $1,566,090. Thus, the
predetermined overhead rate is $16.26 or ($1,566,090 ÷ 96,300) per direct labor hour. The direct materials cost per unit is $18.50 for
the home model and $26.50 for the commercial model. The direct labor cost is $19 per unit for both the home and the commercial
models.
The company's managers identified six activity cost pools and related…
Coronado Fire, Inc. manufactures steel cylinders and nozzles for two models of fire extinguishers: (1) a home fire extinguisher and (2) a
commercial fire extinguisher. The home model is a high-volume (54,000 units), half-gallon cylinder that holds 2 1/2 pounds of multi-
purpose dry chemical at 480 PSI. The commercial model is a low-volume (10,200 units), two-gallon cylinder that holds 10 pounds of
multi-purpose dry chemical at 390 PSI. Both products require 1.5 hours of direct labor for completion. Therefore, total annual direct
labor hours are 96,300 or [1.5 hours x (54,000+ 10,200)]. Estimated annual manufacturing overhead is $1,566,090. Thus, the
predetermined overhead rate is $16.26 or ($1,566,090 ÷ 96,300) per direct labor hour. The direct materials cost per unit is $18.50 for
the home model and $26.50 for the commercial model. The direct labor cost is $19 per unit for both the home and the commercial
models.
The company's managers identified six activity cost pools and related…