Contemporary Mathematics for Business and Consumers, Third Edition

Robert A. Brechner
Copyright © 2003 Thomson/South-Western

Level 2
Chapter 16 - Section I - Exercise 3

The following data represent the inventory figures for 55-gallon tanks at Something's
Fishy:

Something's Fishy
55-Gallon Fish Tanks Inventory
Amount
1-Jan Beginning Inventory 42 units @ $38.00

12-Mar Purchase 80 units @ $36.50

9-Jul Purchase 125 units @ $39.70

2-Sep Purchase 75 units @ $41.75

Fish tanks available for sale Cost of tanks available for sale

a. How many fish tanks did Something's Fishy have available for sale?

b. What is the total cost of the tanks available for sale?

c. If physical inventory on December 31 was 88 tanks on hand, what is

the value of those tanks by using FIFO?

Units Cost / Unit Total

Value of tanks

d. What is the value of the 88 tanks by using LIFO?

Units Cost / Unit Total

Value of tanks

e. What is the value of the 88 tanks by using the average cost method?

Note: Use Excel's Round function to round your average cost to the nearest cent.

Average cost =

Total value =
Contemporary Mathematics for Business and Consumers, Third Edition
Robert A. Brechner
Copyright © 2003 Thomson/South-Western

Level 2
Chapter 16 - Section II - Exercise 1

Using the retail method, estimate the value of the ending inventory at cost on September
30 from the following information for Contemporary Furniture Designs, Inc. Round the
cost ratio to the nearest tenth percent.

Note: Use Excel's Round function to round the decimal result for your cost ratio to the
nearest 1/1000th. This will round the cost ratio to the nearest tenth percent.

Contemporary Furniture Designs, Inc.

September 1 - September 30
Cost Retail
Beginning Inventory, Sept. 1 150,000.00 450,000.00

Purchases (September) 90,000.00 270,000.00

Goods available for sale

Net Sales (September) $395,000.00

Cost ratio =

Ending inventory at retail =

Ending inventory at cost =

Contemporary Mathematics for Business and Consumers, Third Edition
Robert A. Brechner
Copyright © 2003 Thomson/South-Western

Level 1
Chapter 16 - Section II - Exercise 2

Precision Fitness Equipment, Inc., maintains a gross margin of 55% on all its weight
training products. In April, Precision had a beginning inventory of $146,000, net pur-
chases of $208,000, and net sales of $437,000. Use the gross profit method to estimate
the cost of ending inventory.

Beginning inventory =

Net purchases =

Goods available = $0.00

Net sales =

Gross margin =

Estimated cost of goods sold = $0.00

Estimated ending inventory = $0.00

Contemporary Mathematics for Business and Consumers, Third Edition
Robert A. Brechner
Copyright © 2003 Thomson/South-Western

Level 3
Chapter 16 - Section III - Exercise 7

Modern Molding Corporation had cost of goods sold for the year of $1,250,000. The
beginning inventory at cost was $135,000, and the ending inventory at cost amounted
to $190,900. The inventory turnover rate published as the industry standard for a
business of this size is 9.5 times.

a. Calculate the average inventory and actual inventory turnover rate for the company.

b. If the turnover rate is less than 9.5 times, calculate the target average inventory needed
to theoretically come up to industry standards.
Contemporary Mathematics for Business and Consumers, Third Edition
Robert A. Brechner
Copyright © 2003 Thomson/South-Western

Level 2
Chapter 16 - Assessment - Exercise 3

Determine the value of the following inventory for The Rainbow Tile Company by
using the lower-of-cost-or-market rule.

Unit Price
Quantity
Valuation
Description in Square Cost Market Amount
Basis
Feet
Terracota 12'' 8,400 $4.55 $5.10
Super Saltillo 16'' 7,300 8.75 8.08
Monocottura 10' 4,500 3.11 2.90
Glazed Ceramic 6,200 4.50 5.25
Brick Pavers 12,700 3.25 3.15
Total value of inventory:
Contemporary Mathematics for Business and Consumers, Third Edition
Robert A. Brechner
Copyright © 2003 Thomson/South-Western

Level 3
Chapter 16 -Assessment - Exercise 5

On July 24, a tornado destroyed Midwest Wholesaler's main warehouse and all its
contents. Company records indicate that at the time of the tornado the net sales
to date were $535,100 and the purchases were $422,900. The beginning inventory,
on January 1, was $319,800. For the past 3 years, the company has maintained
a gross margin of 35%. Use the gross profit method to estimate the inventory loss
for the insurance claim.