The company in here is forced to sale their older inventory
because of the demand of 700 units while the inventory that last entered their
warehouse was only 600 units. Since they are following the LIFO method of
inventory, LIFO liquidation will take place and the normal gross profit will
differ than the actual profit. The sales for Rose Industries would be $21,000
(700 units x $30). The COGS should have been $12,600 (700 units x $18)
following the normal sale of inventory giving the normal gross profit as $8,400
($21,000 - $12,600). But since the demand is higher than the inventory that was
last purchased, the company needs to sell 100 units of product ab that costs
$12. Therefore, the COGS would be $12,000 [(600 units x $18) + (100 units x
$12). Therefore the actual gross profit is $9,000 which is $600 higher than the
normal gross profit.
Answer:
Option (A)
Explanation:
In a perfectly competitive market condition, there are large number of buyers and sellers. The price of the products is determined by the market forces. If the firms in this market experiencing the economic profits then this will give an incentive to the new firms to enter into the market of soybeans.
Therefore, the new enters to earn profits and hence there is an increase in the number of firms in the market. This will lead to a decrease in the market price of the soybeans because of the increased competition among the firms.
