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    According to the information provided: - Azur Co. had $102,800 in purchases, $10,280 in purchase discounts, $15,420 in freight in, and $5,140 in freight out for the year. - Beginning inventory was $30,840 and ending inventory was $20,560. - To calculate cost of goods sold, the correct amount is $118,220. - Normal capacity under accounting standards refers to a range of production levels that can vary by industry and business factors, rather than a specific formula or actual production amount. - Unallocated fixed overhead costs should be recognized as an expense in the period incurred rather than allocated to inventory accounts.

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    FAR 6

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    According to the information provided: - Azur Co. had $102,800 in purchases, $10,280 in purchase discounts, $15,420 in freight in, and $5,140 in freight out for the year. - Beginning inventory was $30,840 and ending inventory was $20,560. - To calculate cost of goods sold, the correct amount is $118,220. - Normal capacity under accounting standards refers to a range of production levels that can vary by industry and business factors, rather than a specific formula or actual production amount. - Unallocated fixed overhead costs should be recognized as an expense in the period incurred rather than allocated to inventory accounts.

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    25 views2 pages

    Far 6

    Uploaded by

    Rosemarie Cruz
    According to the information provided: - Azur Co. had $102,800 in purchases, $10,280 in purchase discounts, $15,420 in freight in, and $5,140 in freight out for the year. - Beginning inventory was $30,840 and ending inventory was $20,560. - To calculate cost of goods sold, the correct amount is $118,220. - Normal capacity under accounting standards refers to a range of production levels that can vary by industry and business factors, rather than a specific formula or actual production amount. - Unallocated fixed overhead costs should be recognized as an expense in the period incurred rather than allocated to inventory accounts.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
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    of 2

    8. The following information pertained to Azur Co.

    for the year:

    Purchases: $102,800

    Purchase discounts: $10,280

    Freight in: $15,420

    Freight out: $5,140

    Beginning inventory: $30,840

    Ending inventory: $20,560

    What amount should Azur report as cost of goods sold for the year?

    a. $102,800

    b. $118,220

    c. $123,360

    d. $128,500

    Correct Answer: B) $118,220

    10. Per the Codification, what is considered the normal capacity of production facilities?

    a. The average production over the previous five-year period.

    b. Actual production for the period.

    c. Actual production for the period plus loss of capacity for planned maintenance.

    d. A range that may vary based on business and industry-specific factors.

    Correct Answer: D) A range that may vary based on business and industry-specific factors.

    Notes
    (d) Normal capacity refers to a range in production levels that will vary based on business and industry-
    specific factors. Normal capacity is the production expected to be achieved over a number of periods or
    seasons under normal circumstances, taking into account the loss of capacity resulting from planned
    maintenance. Answer (a) is incorrect because the Codification does not specify a formula for calculating
    normal capacity. Answers (b) and (c) are incorrect because actual production may only be used if it
    approximates normal capacity.

    11. How should unallocated fixed overhead costs be treated?

    a. Allocated to finished goods and cost of goods sold based on ending balances in the accounts.

    b. Allocated to raw materials, work in process, and finished goods, based on the ending balances in the
    accounts.

    c. Recognized as an expense in the period in which they are incurred.

    d. Allocated to work in process, finished goods, and cost of goods sold based on ending balances in the
    accounts.

    Correct Answer: C) Recognized as an expense in the period in which they are incurred.

    Notes

    (c) Unallocated fixed overhead costs are recognized as an expense in the period in which they are
    incurred. Therefore, answers (a), (b), and (d) are incorrect.

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