Question

(Algorithmic) Applying the cost of Goods Sold Model Milton Company reported inventory of $149,000 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 $74,500. Required: 1. What was Milton's cost of goods sold for 2014? 2. What is Milton's gross margin for the year?

Answer 1

Milton Company's cost of goods sold for 2014 is $699,500 and its gross margin for the year is $250,500.

Step-by-step explanation:

1. To calculate Milton Company's cost of goods sold for 2014, we need to subtract the cost of ending inventory from the sum of beginning inventory, purchases, and freight-in. In this case:

Cost of Goods Sold = Beginning Inventory + Purchases + Freight-in - Ending Inventory

Cost of Goods Sold = $149,000 + $625,000 + $0 - $74,500 = $699,500

Therefore, Milton Company's cost of goods sold for 2014 was $699,500.

2. Gross margin is calculated by subtracting the cost of goods sold from the net sales. In this case:

Gross Margin = Net Sales - Cost of Goods Sold

Gross Margin = $950,000 - $699,500 = $250,500

Therefore, Milton Company's gross margin for the year was $250,500.