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Chapter 16: 20RQ (page 885)

How does a merchandising company calculate unit cost per item?

Short Answer

Expert verified

The merchandising company calculates the unit cost per item by calculating the total number of items sold from the total cost of goods sold.

Step by step solution

01

Definition of merchandising company

A merchandising company is a company that sells the goods which are purchased from the suppliers.

02

Computation of cost per item

The cost per item for merchandising company is computed by using the formula in which the total cost of goods sold is divided by the total number of items sold.

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Most popular questions from this chapter

Match the term with the correct definition.

1. A philosophy designed to integrate all organizational areas in order to provide customers with superior products and services while meeting organizational objectives. Requires improving quality and eliminating defects and waste.

2. Use of the Internet for business functions such as sales and customer service. Enables companies to reach customers around the world.

3. Evaluating a company’s performance by its economic, social, and environmental impact.

4. Software system that integrates all of a company’s functions, departments, and data into a single system.

5. A system in which a company produces products just when they are needed to satisfy needs. Suppliers deliver materials when they are needed to begin production, and finished units are completed at the right time for delivery to customers.

a. ERP b. JIT c. E-commerce d. TQM e. Triple bottom line

Computing cost of goods sold, merchandising company

Use the following information for The Windshield Helper, a retail merchandiser of auto windshields, to compute the cost of goods sold:

Web Site Maintenance $ 7,900

Delivery Expense 400

Freight In 2,400

Purchases 47,000

Ending Merchandise Inventory 5,500

Revenues 63,000

Marketing Expenses 10,700

Beginning Merchandise Inventory 8,600

Question:Gateway produces electronic calculators. Suppose Gateway’s standard cost per calculator is \(25 for direct materials and \)68 for conversion costs. The following data applyto August activities:

Direct materials purchased (on account) \( 8,300

Conversion costs incurred 20,500

Number of calculators produced 300 calculators

Number of calculators sold (on account, at \)105 each) 295 calculators

Requirements

1. Prepare summary journal entries for August using JIT costing, including the entryto adjust the Conversion Costs account.

2. The beginning balance of Finished Goods Inventory was $1,300. Use a T-accountto find the ending balance of Finished Goods Inventory.

Identify each cost as a period cost or a product cost. If it is a product cost, further indicate if the cost is direct materials, direct labor, or manufacturing overhead. Then determine if the product cost is a prime cost and/or a conversion cost.

6. Wages of assembly line workers for a factory

Making ethical decisions

Sue Peters is the controller at Vroom, a car dealership. Dale Miller recently has been hired as the bookkeeper. Dale wanted to attend a class in Excel spreadsheets, so Sue temporarily took over Dale’s duties, including overseeing a fund used for gas purchases before test drives. Sue found a shortage in the fund and confronted Dale when he returned to work. Dale admitted that he occasionally uses the fund to pay for his own gas. Sue estimated the shortage at $450.

Requirements 2. Would you change your answer if Sue Peters was the one recently hired as controller and Dale Miller was a well-liked, long time employee who indicated he always eventually repaid the fund?
See all solutions

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