Problem 6-6A Problem 6-6A You have the following information for Whispering Wind
ID: 2561714 • Letter: P
Question
Problem 6-6A
Problem 6-6A
You have the following information for Whispering Winds Corp.. Whispering Winds Corp. uses the periodic method of accounting for its inventory transactions. Whispering Winds Corp. only carries one brand and size of diamonds—all are identical. Each batch of diamonds purchased is carefully coded and marked with its purchase cost.March 1 Beginning inventory 137 diamonds at a cost of $295 per diamond. March 3 Purchased 209 diamonds at a cost of $359 each. March 5 Sold 196 diamonds for $655 each. March 10 Purchased 336 diamonds at a cost of $411 each. March 25 Sold 410 diamonds for $703 each.
Explanation / Answer
To maximize gross profit, Whispering Winds Corp. should sell the diamonds with the lowest cost 2 To minimize gross profit, Whispering Winds Corp. should sell the diamonds with the highest cost 3 Cost of goods sold: Mar-5 sales 61596 =(137*295)+(59*359) Mar-25 sales 160710 =(150*359)+(260*411) Cost of goods sold 222306 Sales = (196*655)+(410*703)= 416610 Gross Profit = 416610-222306= 194304 4 Cost of goods sold: Mar-5 sales 80556 =196*411 Mar-25 sales 191446 =(140*703)+(209*359)+(61*295) Cost of goods sold 272002 Gross Profit = 416610-272002= 144608