The following information is for Benitez Company for Year 2:Beginning inventory300 units @ $25Purchase April 8150 units @ $30Purchase September 12250 units @ $34Sales590 units @ $50Required:Assuming that Benitez uses the FIFO cost flow method,a) How much product cost would be allocated to cost of goods sold?b) How much product cost would be allocated to inventory at the end of the year?c) Calculate the average number of days to sell inventory for the year.
What will be an ideal response?
a) $16,760
b) $3,740
c) 81 days
Feedback: a) Cost of goods sold = (300 × $25) + (150 × $30) + (140 × $34) = $16,760
b) Ending inventory = 110 × $34 = $3,740
c)
Average number of days to sell inventory = 365 ÷ Inventory turnover
Inventory turnover = $16,760 ÷ $3,740 = 4.48
Average number of days to sell inventory = 365 ÷ 4.48 = 81 days
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