Poole Company Purchased Two Identical Inventory Items

question 58

Multiple Choice

Poole Company purchased two identical inventory items.One of the items,purchased in January,cost $4.50.The other,purchased in February,cost $4.75.One of the items was sold in March at a selling price of $7.50.Select the correct answer assuming that Poole uses a LIFO cost flow.

• A)The balance in ending inventory would be $4.75.
• B)The amount of gross margin would be $2.75.
• C)The amount of ending inventory would be $4.625.
• D)The amount of cost of goods sold would be $4.50.

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Definitions:

Labor Rate Variance

The difference between the actual hourly wage paid to workers and the expected wage, multiplied by the actual hours worked.

Labor Efficiency Variance

The difference between the actual labor hours taken to produce a good or service and the standard labor hours expected, multiplied by the labor rate.

Direct Labor

Labor costs directly associated with the production of goods or services, including wages for workers who physically produce a product.

Standard Costs

Preset costs for delivering a product or service under normal conditions, used as benchmarks to measure actual performance.