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Accounting: The Jefferson Company

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Jefferson Company had the following sales and purchases during 2011, it first year of business:

January 5
- Purchased 40 units at $100 each

February 15
- Sold 15 units at $150 each

April 10
- Sold 10 units at $150 each

June 30
- Purchased 30 units at $105 each

August 15
- Sold 25 units at $150 each

November 28
- Purchased 30 units at $110 each

Requirements:

1. Calculate the ending inventory, the cost of goods sold, and the gross profit for the December31, 2011, financial statements under each of the following assumptions:
a. FIFO periodic
b. LIFO periodic
c. Weighted average cost periodic

2. How will the differences between the methods affect the income statement for the year and balance sheet December 31, 2011?

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This solution provides and illustration of how the different inventory methods are calculated.

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Managerial Accounting - Jefferson Company

Jefferson Company has two divisions: Jefferson Bottles and Jefferson Juice. Jefferson Bottles makes glass containers, which it sells to Jefferson Juice and other companies. It has a capacity of 10 million bottles a year. Jefferson Juice currently has a capacity of 3 million bottles per year. Jefferson Bottles has a fixed cost of $100,000 per year and a variable cost of $0.10/bottle. Jefferson Bottles can currently sell all of its output at $0.15/bottle.

a. What should Jefferson Bottles charge Jefferson Juice for bottles so that both divisions make appropriate decentralized planning decisions?

b. If Jefferson Bottles can sell only 5 million bottles to outside buyers,
What should Jefferson Bottles charge Jefferson Juice for bottles so that both divisions make appropriate decentralized planning decisions?

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