Use the information below to answer the following questions:
At 1 July 2011, Epsilon Pty Ltd had 100 items of inventory which had cost $50 each. During the year ended 30 June 2012, it purchased 1500 items at a cost of $50 each. Of these, 200 were returned to the supplier as they were damaged. During the year, 1200 items were sold for $80 each, but 50 were returned by customers. Overhead expenses during the year amounted to $15,000.
-What was Epsilon Pty Ltd's cost of goods sold for the year?

Question

Quizplus · Accepted Answer

The cost of goods sold is calculated as follows:
Beginning inventory: 100 items x $50 = $5,000
Purchases: 1500 items x $50 = $75,000
Less returns: 200 items x $50 = $10,000
Net purchases: $75,000 - $10,000 = $65,000
Cost of goods available for sale: $5,000 + $65,000 = $70,000
Ending inventory: 850 items x $50 = $42,500
Cost of goods sold: $70,000 - $42,500 = $27,500
Therefore, the correct answer is B) $57,500.

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