DWAKTU Sdn.Bhd. (DWAKTU) manufactures trendy, high quality and moderately priced ladies watches. As DWAKTU's financial manager, you are asked to recommend a method of inventory costing. The CFO will use your recommendation to prepare DWAKTU financial statement. The following data is for the year ended 31 December 2021. Inventory 1 January 2021 Inventory 31 December 2021 2021 sales Selling price Variable manufacturing cost Variable marketing cost per unit sold Fixed manufacturing costs Fixed marketing and admin costs 8,500 units 3,450 units 34,540 units RM240 per unit RM100 per unit RM20 per unit RM1,415,520 RM1,080,000 Assume standard cost per unit is the same for units in beginning and units produced for the year.
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Required :
a) Explain and reconcile the different in operating income between the two costing
method.
b) Explain, which costing method would you recommend to CFO.
Step by step
Solved in 3 steps
- Presented below is information related to Skysong Company. December 31, 2022 December 31, 2023 December 31, 2024 December 31, 2025 December 31, 2026 December 31, 2027 2022 2023 2024 2025 Date 2026 2027 $ +A Compute the ending inventory for Skysong Company for 2022 through 2027 using the dollar-value LIFO method. $ EA tA +A Ending Inventory (End-of-Year Prices) +A $87,400 119,305 116,388 132,601 157,157 186,480 Ending Inventory 87400 113187 93545 99264 113850 Price Index 100 107 137678 122 133 143 148Compute for the net sales that would be reported in LIVA company's Income Statement. You are assigned to prepare the financial statements of LIVA Company for the year 2021. The following data were made available for you: Ending Inventory at Cost 739,160 3,930,000 16,000 Goods Available for Sale at retail Sales Discount Net markdowns 48,500 Net markups 30,000 1,450,000 2,422,000 Beginning inventory at retail Purchases at retail The company adopts the ayverage cost approach to estimate the value of its inventory and the cost ratio is computed at 68%.You are assigned to prepare the financial statements of LIVA Company for the year 2021. The following data were made available for you: Ending Inventory at Cost 739,160 Goods Available for Sale at retail 3,930,000 Sales Discount 16,000 48,500 Net markdowns Net markups 30,000 Beginning inventory at retail 1,450,000 2,422,000 Purchases at retail The company adopts the average cost approach to estimate the value of its inventory and the cost ratio is computed at 68%.
- Compute for the net sales that would be reported in LIVA company's Income Statement. You are assigned to prepare the financial statements of LIVA Company for the year 2021. The following data were made available for you: Ending Inventory at Cost 739,160 Goods Available for Sale at retail 3,930,000 16,000 48,500 Sales Discount Net markdowns Net markups 30,000 Beginning inventory at retail 1,450,000 Purchases at retail 2,422,000 The company adopts the average cost approach to estimate the value of its inventory and the cost ratio is computed at 68%.UMET's Stores had the following inventory transactions in 2020: Transaction Units Cost per unit 1/1 Balance 50 $6 2/14 Sale 25 5/23 Purchase 100 8 8/21 Sale 50 11/5 Purchase 25 12 11/18 Sale 95 Required: Compute tge cost of goods sold and the ending inventory using the periodic inventory system for each of the following cost flow assumptions: a. FIFO b. LIFO c. Weighted averageAccounting Compute for the net sales that would be reported in LIVA company's Income Statement. You are to be assigned to prepare the financial statement of LIVA Company for the year 2021. The following data were made available for you: Ending Inventory at Cost - 739, 160 Goods Available for Sale at retail - 3, 930, 000 Sales Discount - 16, 000 Net markdowns - 48, 500 Net markups - 30, 000 Beginning inventory at retail - 1, 450, 000 Purchases at retail - 2, 422, 000 The company adopts the average cost approach to estimate the value of its inventory and the cost ratio is computed at 68%.
- Oasis Company has used the dollar-value LIFO method for inventory cost determination for many years. The following data were extracted from Oasis' records. Date PriceIndex Ending Inventory at Base Prices Ending Inventoryat Dollar-Value LIFO December 31, 2020 105 $92,000 $92,600 December 31, 2021 ? 97,000 98,350 Instructions Calculate the index used for 2021 that yielded the above results.Stigma industries has the following beginning inventory and purchases for 2020: 12each 4,800 14each 8,40d 13,200 Beginning inventory 400 Inventory purchased 600 Cost of goods availablel,000units It sells 600 of these units in 2020. compute its cost of goods sold for 2020 and the ending inventory reported on its 2020 balance sheet under each of the following inventory costing methods: FIFO LIFO Cost of goods soldAnswerAnswer Ending inventory AnswerAnswerQuestion: Calculate and interpret liquidity ratios Calculate the inventory turnover, days in inventory, Accounts receivable turnover and the Average Collection period for the years ending June 30, 2020, and 2019 for the Green Construction Supplies Company. Assuming that they have a 60-day credit policy, evaluate their accounts receivable management and recommend ways to improve it. Evaluate their inventory management and suggest ways to improve it. Selected information ($) 2020 2019 2018 Net Sales (80% on credit) 430,000 720,000 640,000 Cost of Goods Sold 250000 350000 320000 Accounts Receivable 220,000 110,000 76,000 Allowance for doubtful accounts 35000 18000 14000 Bad debt expense 30000 12000 9000 Inventory 150000 100000 80000
- The management of Tudor Living asks for your help in determining the comparative effects of the FIFO and average-cost inventory cost flow methods. For 2020, the accounting records provide the data shown below. Units purchased consisted of 40,000 units at £4.00 on May 10; 60,000 units at £4.20 on August 15; and 20,000 units at £4.45 on November 20. Income taxes are 28%. Instructions a.Prepare comparative condensed income statements for 2020 under FIFO and average cost. (Show computations of ending inventory.) b.Answer the following questions for management: 1.Which inventory cost flow method produces the more meaningful inventory amount for the statement of financial position? Why? 2.Which inventory cost flow method is more likely to approximate the actual physical flow of the goods? Why? 3.How much more cash will be available for management under average-cost thanunder FIFO? Why?Presented below is information related to Dino Radja Company. Date Ending Inventory(End-of-Year Prices) PriceIndex December 31, 2017 $ 80,000 100 December 31, 2018 115,500 105 December 31, 2019 108,000 120 December 31, 2020 122,200 130 December 31, 2021 154,000 140 December 31, 2022 176,900 145 Instructions Compute the ending inventory for Dino Radja Company for 2017 through 2022 using the dollar-value LIFO method.Applying the Cost of Goods Sold Model The following amounts were obtained from Stanwick Company's accounting records. 2019 2020 Net sales $388,600 $427,460 Cost of goods sold: Beginning inventory $36,800 (d) Purchases (a) 296,700 Goods available for sale (b) (e) Ending inventory 42,740 (f) Cost of goods sold (c) 296,070 Gross margin $123,040 (g) Instructions: Compute the missing amounts. Input your answers as positive numbers. 2019 2020 Net sales $388,600 $427,460 Cost of goods sold: Beginning inventory $36,800 $fill in the blank 1 Purchases fill in the blank 2 296,700 Goods available for sale fill in the blank 3 fill in the blank 4 Ending inventory 42,740 fill in the blank 5 Cost of goods sold fill in the blank 6 296,070 Gross margin $123,040 $fill in the blank 7