At the Beginning of the Year, Uptown Athletic Had an Inventory

question 132

Multiple Choice

At the beginning of the year, Uptown Athletic had an inventory of $600,000.During the year, the company purchased goods costing $2,250,000.If Uptown Athletic reported ending inventory of $750,000 and sales of $3,000,000, their cost of goods sold and gross profit rate would be

• A)$1,500,000 and 70%.
• B)$2,100,000 and 30%.
• C)$1,500,000 and 30%.
• D)$2,100,000 and 70%.

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Definitions:

Overhead Costs

General business expenses that are not directly attributable to creating a product or service but are necessary for the business's day-to-day operations.

Plantwide Overhead Rate

A single overhead rate calculated by dividing all manufacturing overhead costs by an entity's total allocation base, typically direct labor hours or machine hours, used across an entire factory.

Machine Hours

A measure of the total time that machines are operating, used in cost accounting to allocate machine-related expenses to products.

Allocation Base

A measure or statistic used to allocate costs among different departments, products, or activities within an organization.