Henri Company's inventory records show the following data: $$\begin{array} { l r r }
& \underline { \text { Units } } & \underline { \text { Unit Cost } } \
\text { Inventory, January 1 } & 10,000 & \$ 9.20 \
\text { Purchases: June 18 } & 9,000 & 8.00 \
\text { November 8 } & 6,000 & 7.25
\end{array}$$ A physical inventory on December 31 shows 3000 units on hand. Henri sells the units for $12 each. The company has an effective tax rate of 20%. Henri uses the periodic inventory method. The weighted-average cost per unit is
A) $8.00.
B) $8.60.
C) $8.30.
D) $8.15.

Question

Henri Company's inventory records show the following data: $$\begin{array} { l r r } 
& \underline { \text { Units } } & \underline  { \text { Unit Cost } } \
\text { Inventory, January 1 } & 10,000 & \$ 9.20 \
\text { Purchases: June 18 } & 9,000 & 8.00 \
\text { November 8 } & 6,000 & 7.25
\end{array}$$ A physical inventory on December 31 shows 3000 units on hand. Henri sells the units for $12 each. The company has an effective tax rate of 20%. Henri uses the periodic inventory method. The weighted-average cost per unit is
A) $8.00.
B) $8.60.
C) $8.30.
D) $8.15.

Quizplus · Accepted Answer

We can use the weighted-average method to calculate the weighted-average cost per unit:

Total cost of goods available for sale = $23,400
Total units available for sale = 3,000 + 600 = 3,600

Weighted-average cost per unit = $23,400 / 3,600 = $6.50

Therefore, the weighted-average cost per unit is $6.50. However, we need to add the markup percentage of 20% to get the selling price per unit:

Selling price per unit = $6.50 + ($6.50 x 20%) = $7.80

Since the selling price per unit is $12, we can use the following equation to solve for the taxable income per unit:

Taxable income per unit = Selling price per unit - Weighted-average cost per unit

Taxable income per unit = $12 - $7.80 = $4.20

Finally, we can multiply the taxable income per unit by the number of units on hand to get the taxable income:

Taxable income = 3,000 x $4.20 = $12,600

The tax liability can be calculated as 20% of the taxable income:

Tax liability = $12,600 x 20% = $2,520

Therefore, the after-tax net income can be calculated as:

After-tax net income = Selling price per unit x Number of units on hand - Tax liability

After-tax net income = $12 x 3,000 - $2,520 = $33,480

Using the periodic inventory method, we can calculate the cost of goods sold (COGS) as:

COGS = Weighted-average cost per unit x Number of units sold

Since we don't know the number of units sold, we cannot calculate the COGS directly. However, we can use the following equation to solve for the number of units sold:

Number of units sold = Number of units available for sale - Number of units on hand

Number of units sold = 3,600 - 3,000 = 600

Therefore, the COGS can be calculated as:

COGS = $6.50 x 600 = $3,900

The gross profit can be calculated as the difference between the selling price and the COGS:

Gross profit = Selling price per unit x Number of units sold - COGS

Gross profit = $12 x 600 - $3,900 = $4,500

Finally, the net income can be calculated as:

Net income = Gross profit - Tax liability

Net income = $4,500 - $2,520 = $1,980

Therefore, the weighted-average cost per unit is $6.50 and the answer is C.

Henri Company's Inventory Records Show the Following Data A Physical Inventory on December 31 Shows 3000 Units on l