At the Beginning of 2011, Midway Hardware Has an Inventory

question 29

Multiple Choice

At the beginning of 2011, Midway Hardware has an inventory of $400,000. Because sales growth was strong during 2011, the owner wants to increase inventory on hand to $450,000 at December 31, 2011. If net sales for 2011 are expected to be $1,600,000, and the gross profit rate is expected to be 35%, compute the cost of the merchandise the owner should expect to purchase during 2011.

• A) $1,490,000.
• B) $1,040,000.
• C) $1,090,000.
• D) $1,600,000.

Understand how to apply overhead costs using standard costing systems.

Recognize the importance of variance analysis in managerial decision-making.

Identify the responsible parties for specific variances and understand the implications for performance evaluation.

Understand the process of isolating variances at the earliest point in time for effective management.

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Definitions:

Present Value

The calculated present value of a prospective sum of money or cash flow stream, utilizing a given rate of return.

Land

In economics, land refers to all natural resources used to produce goods and services, including not just real estate but also agricultural land, forests, and mineral resources.

Demand

The amount of a product or service that buyers are ready and capable of buying at different price levels over a specific period.

Rent

A payment made by a tenant at regular intervals in exchange for the use of land, a building, an apartment, an office, or other property.