Applying the Cost of Goods Sold Model Wilson Company sells a single product. At

Question

Applying the Cost of Goods Sold Model

Wilson Company sells a single product. At the beginning of the year, Wilson had 150 units in stock at a cost of $8 each. During the year, Wilson purchased 825 more units at a cost of $8 each and sold 240 units at $13 each, 210 units at $15 each, and 335 units at $14 each.

Required:

1. Using the cost of goods sold model, what is the amount of ending inventory and cost of goods sold?

2. What is Wilson's gross margin for the year?

Explanation / Answer

Opening Stock = 150Units@$8 =$1200

Purchases = 825units@$8 =$6600

Sales = 240Units@$13 = $3120

210Units@$15 = $3150

335Units@$14 = $4690

Total Sales = $10960

Ending Inventory = (150+825-240-210-335) =190 Units@$8 = $1520

Cost Of Goods Sold = (240+210+335) = 785 Units@$8 = $6280

Gross Profit = Sales -Cost of Goods Sold

= $10960 - $6280

= $4680

Gross Profit Margin = Gross Profit /Sales x100

= $4680/10960 x 100 =42.70

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