Problem: COST OF SALES

Case 1: 
Inventory, beginning 80,000
Inventory, end 128,000
Purchases 320,000
Freight-in 16,000
Purchase returns 8,000
Purchase discounts 11,200

Case 2:
Inventory, beginning 120,000
Inventory, ending 192,000
Purchases 480,000
Freight-in 24,000
Purchase returns 12,000
Purchase discounts 16,800

Requirements: 
Compute for the cost of sales.

To be written in one whole size paper.

To compute the **Cost of Sales**, we use the following formula:

\[
\text{Cost of Sales} = \text{Beginning Inventory} + \text{Net Purchases} - \text{Ending Inventory}
\]

Where:
- **Net Purchases** is calculated as:

\[
\text{Net Purchases} = \text{Purchases} + \text{Freight-in} - \text{Purchase Returns} - \text{Purchase Discounts}
\]

---

### **Case 1:**

- **Beginning Inventory** = 80,000
- **Ending Inventory** = 128,000
- **Purchases** = 320,000
- **Freight-in** = 16,000
- **Purchase Returns** = 8,000
- **Purchase Discounts** = 11,200

#### Step 1: Calculate Net Purchases
\[
\text{Net Purchases} = 320,000 + 16,000 - 8,000 - 11,200
\]
\[
\text{Net Purchases} = 316,800
\]

#### Step 2: Calculate Cost of Sales
\[
\text{Cost of Sales} = 80,000 + 316,800 - 128,000
\]
\[
\text{Cost of Sales} = 268,800
\]

---

### **Case 2:**

- **Beginning Inventory** = 120,000
- **Ending Inventory** = 192,000
- **Purchases** = 480,000
- **Freight-in** = 24,000
- **Purchase Returns** = 12,000
- **Purchase Discounts** = 16,800

#### Step 1: Calculate Net Purchases
\[
\text{Net Purchases} = 480,000 + 24,000 - 12,000 - 16,800
\]
\[
\text{Net Purchases} = 475,200
\]

#### Step 2: Calculate Cost of Sales
\[
\text{Cost of Sales} = 120,000 + 475,200 - 192,000
\]
\[
\text{Cost of Sales} = 403,200
\]

---

### Final Results:

- **Cost of Sales for Case 1** = **268,800**
- **Cost of Sales for Case 2** = **403,200**

---

Would you like more details or further explanation?

Here are 5 related questions to extend your understanding:
1. How would changing the freight-in impact the cost of sales?
2. Why are purchase discounts subtracted from net purchases?
3. How does ending inventory affect gross profit?
4. How would you calculate the cost of goods available for sale?
5. What if both freight-in and purchase returns were zero—how would this change the cost of sales?

**Tip**: Keeping track of purchase discounts and returns can significantly affect your overall cost of sales. Be mindful of how these reduce your net purchases!

Problem: COST OF SALES

Case 1: 
Inventory, beginning 80,000
Inventory, end 128,000
Purchases 320,000
Freight-in 16,000
Purchase returns 8,000
Purchase discounts 11,200

Case 2:
Inventory, beginning 120,000
Inventory, ending 192,000
Purchases 480,000
Freight-in 24,000
Purchase returns 12,000
Purchase discounts 16,800

Requirements: 
Compute for the cost of sales.

This page provides a detailed step-by-step solution to calculating the cost of sales for two inventory cases, using key formulas like net purchases and cost of sales. Learn how to compute using inventory values, purchase returns, and discounts, suitable for college-level business and accounting students.

Math Problem Statement

Solution

Ask a new question for Free

By Image

Math Problem Analysis

Mathematical Concepts

Formulas

Theorems

Suitable Grade Level

Related Recommendation