Sandra Company Had Two Hundred Units of Inventory on Hand

question 102

Multiple Choice

Sandra Company had two hundred units of inventory on hand at the end of the year. These were recorded at a cost of $12 each using the last-in, first-out (LIFO) method. The current replacement cost is $10 per unit. The selling price charged by Sandra Company for each finished product is $15. As a result of recording the adjusting entry as per the lower-of-cost-or-market rule, the gross profit will:

• A)increase by $2,000.
• B)decrease by $2,000.
• C)increase by $400.
• D)decrease by $400.

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Definitions:

Tax Per Unit

A tax that is levied on a per unit basis, meaning for every unit of a good produced or sold, a certain amount of tax is paid.

Deadweight Loss

A reduction in economic effectiveness that happens when a good or service does not reach, or cannot reach, its equilibrium state.

Tax Per Unit

Tax per unit is a fixed amount of tax applied to a product or service, regardless of its price, which directly affects the supply curve by increasing production costs.

Tax Levied

The process of imposing a tax by a governing authority on the citizens and organizations.