Valix Finacc vol 1 Problem 8-35

Financial Accounting Volume 1 2008 Valix-Peralta
Chapter 1 Problem 8-35

                                                                                                                                                   Cost               Retail

Finished goods – January 1                                                                 144,000           240,000

Cost of goods manufactured (squeeze                                           1,200,000        2,000,000

Goods available for sale                                                                  1,344,000        2,240,000

Less: Finished goods – December 31                                                   504,000           840,000

Cost of goods sold                                                                              840,000        1,400,000

                                                                                               

The amount of goods manufactured at retail is determined by simply working back.

                             Goods manufactured at cost  

Cost ratio    =    -------------------------------------------------

                             Goods manufactured at retail

                     =      1,200,000/2,000,000

                     =      60%

Finished goods:

   January 1  -   240,000 x 60%     144,000                 December 31  -  840,000 x 60%      504,000