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Describe the relative effects on income from operations

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Reference no: EM13872234

Use the following information to complete this exercise: sales, 550 units for $ 12,500; beginning inventory, 300 units; purchases, 400 units; ending inventory, 150 units; and operating expenses, $ 4,000. Begin by setting up the following table and then complete the requirements that follow.

Required:

1. Complete the table for each situation. In Situations A and B (costs rising), assume the following: beginning inventory, 300 units at $ 12 = $ 3,600; purchases, 400 units at $ 13 = $ 5,200. In Situations C and D (costs falling), assume the opposite; that is, beginning inventory, 300 units at $ 13 = $ 3,900; purchases, 400 units at $ 12 = $ 4,800. Use periodic inventory procedures.

2. Describe the relative effects on Income from Operations as demonstrated by requirement 1 when costs are rising and when costs are falling.

3. Describe the relative effects on Income Tax Expense for each situation.

Reference no: EM13872234

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