On December 31, a Company Needed to Estimate Its Ending

question 146

Multiple Choice

On December 31, a company needed to estimate its ending inventory to prepare its fourth quarter financial statements. The following information is currently available: Inventory as of October 1: $12,500
Net sales for fourth quarter: $40,000
Net purchases for fourth quarter: $27,500
The company typically achieves a gross profit ratio of 15%. Ending Inventory under the gross profit method would be:

• A)$4,000
• B)$6,000
• C)$10,000
• D)$16,000
• E)$34,000

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Definitions:

Product Differentiation

Product Differentiation is the process by which companies distinguish their products from those of competitors on aspects like quality, design, or brand.

Price Leadership

A market situation where one leading firm sets the price of goods or services, and other firms in the industry follow suit, typically seen in oligopolies.

Advertising

A form of communication that is typically paid for, aimed at informing or persuading a target audience about products, services, or ideas.

Product Differentiation

The strategy of setting a product or service apart from those in the market to enhance its desirability to a certain target group.