eBook Calcutator Brief Exercise 633 Algorithmic Applying the

eBook Calcutator Brief Exercise 6-33 (Algorithmic) Applying the Cost of Goods Sold Model eported inventory of $109,000 at the beginning of 2014. During the year, it purchased inventory of $625,000 and sold inventory for $950,000. A count of inventory at the end of the year determined that the cost of inventory on hand was $54, 500. Required 1. What was Milton\'s cost of goods sold for 2014? 2. What is Milton\'s gross margin for the year? Feedback T Check My Work Apply the cost of goods sold model. The determination of cost of goods sold requires an allocation of the cost of goods available for sale between ending nventory and cost of goods sold

Solution

1. Milton\'s Cost of Goods sold for 2014 is $679,500

Calculation of Cost of Goods sold

Opening Inventory + Purchases - Ending Inventory

As per the data given in the question

Opening Inventory = $109,000

Purchases = $625,000

Ending Inventory = $54,500

Therefore Cost of Goods sold

= $109,000 + $625,000 - $54,500

= $679,500

2. Milton\'s gross margin for the year = 28.47%

Gross Margin = (Sales - Cost of goods sold) / Sales

Sales = $950,000

Cost of goods sold = $679,500

Therefore Gross Margin = ($950,000 - $679,500) / $950,000

= $270500 / $950,000

= 0.2847 or 28.47%