Trift company made total purchases of $ 310 comma 000 in the most current year. It paid freight in of $ 5 comma 500 on its purchases. Freight out, the cost to deliver the merchandise when it was sold to Trift 's customers, totaled $ 7 comma 800. Of the total purchases Trift made during the period, it returned $ 28 comma 000 of the merchandise. Trift took advantage of $ 2 comma 700 of purchase discounts offered by its vendors. What was Trift 's cost of inventory?

Question

Business

Barbara Burke

23 May, 12:52

Trift company made total purchases of $ 310 comma 000 in the most current year. It paid freight in of $ 5 comma 500 on its purchases. Freight out, the cost to deliver the merchandise when it was sold to Trift 's customers, totaled $ 7 comma 800. Of the total purchases Trift made during the period, it returned $ 28 comma 000 of the merchandise. Trift took advantage of $ 2 comma 700 of purchase discounts offered by its vendors. What was Trift 's cost of inventory?

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Kylie Schultz · Answer 1

Answer: $284,800

Explanation:

Inventory cost are cost associated with the procurement, storage and management of goods. It includes the actual price of the good, the ordering cost or cost involved in getting the inventory to the warehouse or storage area and other fees used to keep inventory intact.

Given the following details;

Total purchase cost = $310,000

Freight-in = $5,500

Freight-out (cost of delivery when sold to Trift's customers) - $7,800

Freight-out cost isn't part of the inventory cost. Only Freight-in cost (cost to get inventory to Trift) is calculated as part of the inventory cost

Cost of Returned merchandise = $28,000

Purchase discount = $2,700

Therefore,

Total cost of inventory = total purchase cost + Freight-in cost - (cost of returned merchandise + purchase discount)

Total inventory cost = $310,000 + $5,500 - ($28,000+$2,700)

Total inventory cost = $310,000 + $5,500 - $30,700

Total inventory cost = $284,800