On October 29, 2012, Lobo Co. began operations by purchasing razors for resale.
ID: 2504994 • Letter: O
Question
On October 29, 2012, Lobo Co. began operations by purchasing razors for resale. Lobo uses the perpetual inventory method. The razors have a 90-day warranty that requires the company to replace any nonworking razor. When a razor is returned, the company discards it and mails a new one from Merchandise Inventory to the customer. The company's cost per new razor is $16 and its retail selling price is $80 in both 2012 and 2013. The manufacturer has advised the company to expect warranty costs to equal 6% of dollar sales.
Explanation / Answer
On October 29, 2012, Lobo Co. began operations by purchasing razors for resale. Lobo uses the perpetual inventory method. The razors have a 90-day warranty that requires the company to replace any nonworking razor. When a razor is returned, the company discards it and mails a new one from Merchandise Inventory to the customer. The company's cost per new razor is $16 and its retail selling price is $80 in both 2012 and 2013. The manufacturer has advised the company to expect warranty costs to equal 6% of dollar sales.
Cost of Good Sold = 16 + 80*6% = $ 20.80
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.