A New Textbook Is Published in the Spring of 2014

question 66

Essay

A new textbook is published in the spring of 2014.Your campus bookstore buys 400 copies at $70 each in June,an additional 1,000 copies in August at $72 each,and 600 copies in December at $75 each.At the end of December 2014,the bookstore has sold 1,900 copies of the text.
Calculate the cost of goods sold and the cost of ending inventory:
a)under the weighted average cost method.
b)under the FIFO method.
c)under the LIFO method.
Using your calculations as a guide,explain how different inventory costing methods affect the numerator and denominator of the inventory turnover ratio when unit costs are increasing.Conclude your explanation by identifying the method that produces the highest (and lowest)inventory turnover ratio.

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Definitions:

Salesperson

An individual who sells goods or services to customers, often working on behalf of a company or as an independent representative, aiming to meet sales targets and fulfill customer needs.

Marginal Enterprises

Businesses operating at the minimum level of profitability necessary to sustain operations.

Merchandise

Goods or products that are bought and sold in the course of business.

Production Plant

A facility where raw materials are transformed into finished goods through various processes and machinery.