Larry is in charge of collecting customer service and satisfaction data for his company. He’s not sure which key groups in the c
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Answer: Budgeted Raw Material to be consumed in July.
Quantity Price per pound Total
10,200 $6 $61,200
Explanation:
As for the information provided, the material at month end in hand shall be:
20% of upcoming month's sale.
If in June at month end, the inventory in hand = 2,040 pounds of raw material.
Then, this represents 20% of total requirement of July.
Therefore, total requirement in July =
This basically means:
Total inventory required =
Quantity Price per pound Total
10,200 $6 $61,200
A new income statement for August for Swift company is shown below.
Also, since the president has asked you to check over the income statement and make a recommendation as to whether the company should look for a buyer for its assets.
My recommendation would be to not buy.
Swift Company
Income Statement
For the Month Ended August 31
Particulars Amount (in $) Amount (in $)
Sales .............................................................. 450,000
Cost of goods sold:
Finished goods inventory, August 1 ............... 40,000
Add: Cost of goods manufactured ................. <u>310,000 </u>
Goods available for sale ................................ 350,000
Deduct: Finished goods inventory, August 31..<u> 60,000</u> <u> 290,000 </u>
Gross margin .................................................. 160,000
Selling and administrative expenses ................. <u>142,000</u>
Net operating income...................................... 18,000
Sam failed to distinguish between product costs and period costs when preparing the August income statement, and he also failed to recognize changes in inventories between the beginning and end of the month.
Once these errors are corrected, the company's financial situation looks much better, and selling the company may not be a good idea.
Hence, my recommendation would be not to buy.
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