Woods Co Uses a Perpetual Inventory System, and Accepts the World

question 107

Essay

Woods Co. uses a perpetual inventory system, and accepts the World Express credit card from its customers. World Express charges a 3.5% service fee and all credit card receipts deposited are credited to the company account on the day of deposit. On February 28, Woods sold $24,000 worth of merchandise to customers (that had cost $14,400) using the World Express charge card. Prepare the journal entries to record February 28 sales.

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Definitions:

Variable Expenses

Costs that change in proportion to the level and nature of business activity, such as advertising, sales commissions, and shipping costs.

Cost Volume Profit Analysis

A managerial accounting technique used to determine the effects of changes in costs and volume on a company's profits.

Unit Contribution Margin

The difference between the selling price per unit and the variable cost per unit, indicating how much each unit contributes to covering fixed costs and generating profit.

Break-Even Point

The production level at which total revenues equal total expenses, and there is neither profit nor loss.