Question

5. Define the cash budget and describe we s om 6. Given these data, the Candidate determines, using both the FIFO and the Weighted-Average Cost Methods, the cost of goods sold and the ending inventory: Units available Units sold Actual unit | Total cost cost 1,20 € 1032 € Beginning inventory 620 Purchase 580 | 1,50 € 870 € Sale 540 Purchase 175 1,50 € 263 € Total 1615 1160 2165€ 860 Sale 7. Assuming the following balance sheet and economic data - Liabilities: 165000; Non current assets: 125000: Current assets: 155000: Operating Profit - 34560; Net income: 75000. Calculate the ROE and ROI.

Q. (6)
Q. (7)

Answer 1

Correct Answer:

	FIFO
A	Total Units Available for sale			1615		2,165
	Units Sold			1160
	Ending Inventory Units			455
	Valuation
	Cost of Goods Sold		860		1.20	1,032.00
			300		1.50	450
B	Cost of Goods Sold		1160	units		1,482
A-B	Ending Inventory		455	units		682.5

	Weighted Average
A	Total Units Available for sale			1615		2,165
	Units Sold			1160
	Ending Inventory Units			455
	Valuation
	Cost of Goods Sold		1160		1.34	1,555
B	Cost of Goods Sold		1160	units		1,555
A-B	Ending Inventory		455	units		610

Working:

Cost of Goods Available for sale
		Units		Cost per unit		value
Beginning Inventory		860		1.2		1,032.0
Purchases		580		1.5		870.0
Purchases		175		1.5		263
Total		1615				2,165
Weighted Average Cost Per unit
Units			(A)		1615
Total Cost			(B)		$               2,164.50
Average Cost			(C=B/A)		$                       1.34

Requirement 2:

Net Income	/	shareholders’ equity	=	ROE
75,000		115,000		65.2%

Working:

Balance sheet
Assets
current assets	1,55,000
non-current assets	1,25,000
total assets	2,80,000
liabilities	1,65,000
shareholders’ equity	1,15,000
total liabilities and shareholders’ equity	2,80,000

ROI = Net income / Cost of investment

Shareholder’s Equity is calculated by subtracting liabilities from total assets. For ROI, Cost of investment is not given in the question therefore unable to calculate ROI .

End of answer.

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