Asked by la douce Fleur on May 12, 2024
Verified
Henri Company's inventory records show the following data: Units ‾ Unit Cost ‾ Inventory, January 1 10,000$9.20 Purchases: June 18 9,0008.00 November 8 6,0007.25\begin{array} { l r r } & \underline { \text { Units } } & \underline { \text { Unit Cost } } \\\text { Inventory, January 1 } & 10,000 & \$ 9.20 \\\text { Purchases: June 18 } & 9,000 & 8.00 \\\text { November 8 } & 6,000 & 7.25\end{array} Inventory, January 1 Purchases: June 18 November 8 Units 10,0009,0006,000 Unit Cost $9.208.007.25 A physical inventory on December 31 shows 3000 units on hand. Henri sells the units for $12 each. The company has an effective tax rate of 20%. Henri uses the periodic inventory method. The weighted-average cost per unit is
A) $8.00.
B) $8.60.
C) $8.30.
D) $8.15.
Weighted-Average Cost
A calculation used in inventory management and cost accounting that takes into account the varying costs of goods and determines an average cost for the goods sold.
Periodic Inventory System
An inventory system that updates inventory balances after a specific period, calculating COGS by a physical count.
Unit Cost
The calculated cost to produce one unit of product, taking into account all variable and fixed costs.
- Learn the process and effects of different stock valuation methods (FIFO, LIFO, Average Cost) on financial statements.
Verified Answer
Total cost of goods available for sale = $23,400
Total units available for sale = 3,000 + 600 = 3,600
Weighted-average cost per unit = $23,400 / 3,600 = $6.50
Therefore, the weighted-average cost per unit is $6.50. However, we need to add the markup percentage of 20% to get the selling price per unit:
Selling price per unit = $6.50 + ($6.50 x 20%) = $7.80
Since the selling price per unit is $12, we can use the following equation to solve for the taxable income per unit:
Taxable income per unit = Selling price per unit - Weighted-average cost per unit
Taxable income per unit = $12 - $7.80 = $4.20
Finally, we can multiply the taxable income per unit by the number of units on hand to get the taxable income:
Taxable income = 3,000 x $4.20 = $12,600
The tax liability can be calculated as 20% of the taxable income:
Tax liability = $12,600 x 20% = $2,520
Therefore, the after-tax net income can be calculated as:
After-tax net income = Selling price per unit x Number of units on hand - Tax liability
After-tax net income = $12 x 3,000 - $2,520 = $33,480
Using the periodic inventory method, we can calculate the cost of goods sold (COGS) as:
COGS = Weighted-average cost per unit x Number of units sold
Since we don't know the number of units sold, we cannot calculate the COGS directly. However, we can use the following equation to solve for the number of units sold:
Number of units sold = Number of units available for sale - Number of units on hand
Number of units sold = 3,600 - 3,000 = 600
Therefore, the COGS can be calculated as:
COGS = $6.50 x 600 = $3,900
The gross profit can be calculated as the difference between the selling price and the COGS:
Gross profit = Selling price per unit x Number of units sold - COGS
Gross profit = $12 x 600 - $3,900 = $4,500
Finally, the net income can be calculated as:
Net income = Gross profit - Tax liability
Net income = $4,500 - $2,520 = $1,980
Therefore, the weighted-average cost per unit is $6.50 and the answer is C.
Learning Objectives
- Learn the process and effects of different stock valuation methods (FIFO, LIFO, Average Cost) on financial statements.
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