On June 1, Jefferson Co

question 107

Short Answer

On June 1, Jefferson Co. had one unit in beginning inventory that cost $5.00. During June, Jefferson paid cash to purchase two additional inventory items. Jefferson purchased the first item for cash at a cost $5.00, and the second at a cost of $6.00. Jefferson Co. sold two inventory items for $12.00 each, receiving cash. Based on this information alone, indicate whether each of the following items is true or false.
_____ a) The amount of ending inventory will be $5 assuming the LIFO cost flow was used.
_____ b) Cost of goods sold would be $11 assuming the weighted average cost flow was used.
_____ c) Cash flow from operating activities in June would be $14 assuming a FIFO cost flow was used.
_____ d) Cash flow from operating activities in June would be $13 independent of what cost flow assumption was used.
_____ e) The amount of gross margin would be $14 assuming the FIFO cost flow was used.

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Definitions:

Excessive Inventories

A situation where a company holds more stock items than necessary, leading to increased storage costs and potential wastage.

Materials Price Variance

This measures the difference between the actual cost of materials used in production and the standard cost expected for those materials, indicating how efficiently an organization is purchasing materials.

Labor Rate Variance

The difference between the actual cost of direct labor and the expected (or standard) cost, calculated as (Actual rate - Standard rate) x Actual hours.

Standard Hourly Rate

The predetermined cost per hour for labor, used in budgeting and costing to assign labor costs to products and services.