Transactions Related to Mongoose Mountain Bike

Oct 13, 2025 by talynt.org 39 views

Mitchell Bicycle Shop: Calculating Cost of Goods Sold and Ending Inventory

Mitchell Bicycle Shop is a renowned retailer of high-quality bicycles, with the Mongoose mountain bike being one of its top-selling products. As the company uses the periodic method for inventory, it is essential to calculate the Cost of Goods Sold (COGS) and ending inventory on March 31. In this article, we will delve into the transactions related to the Mongoose mountain bike and compute the COGS and ending inventory for the month of March.

Transactions Related to Mongoose Mountain Bike

The following transactions are related to the Mongoose mountain bike for the month of March:

Beginning Inventory: On March 1, Mitchell Bicycle Shop had 100 units of Mongoose mountain bikes in stock, with a cost of $500 per unit. The total value of the beginning inventory is $50,000 (100 units x $500 per unit).
Purchases: During the month of March, the company purchased 200 units of Mongoose mountain bikes at a cost of $550 per unit. The total value of the purchases is $110,000 (200 units x $550 per unit).
Sales: Mitchell Bicycle Shop sold 150 units of Mongoose mountain bikes during the month of March at a selling price of $800 per unit. The total revenue from sales is $120,000 (150 units x $800 per unit).
Returns: The company received 20 units of Mongoose mountain bikes as returns from customers during the month of March. The cost of the returned units is $10,000 (20 units x $500 per unit).

Calculating Cost of Goods Sold (COGS)

To calculate the COGS, we need to determine the total cost of the goods sold during the month of March. The COGS includes the cost of the goods sold, as well as the cost of the goods that were returned by customers.

Formula for COGS:

COGS = Beginning Inventory + Purchases - Ending Inventory

Step 1: Calculate the Total Cost of Goods Sold

The total cost of goods sold includes the cost of the goods sold, as well as the cost of the goods that were returned by customers.

Total Cost of Goods Sold = Cost of Goods Sold + Cost of Returned Goods

Cost of Goods Sold = Sales x (Cost per Unit / Selling Price per Unit) = $120,000 x (500 / 800) = $75,000

Cost of Returned Goods = Number of Returned Units x Cost per Unit = 20 units x $500 per unit = $10,000

Total Cost of Goods Sold = $75,000 + $10,000 = $85,000

Step 2: Calculate the Ending Inventory

The ending inventory includes the units that were in stock at the end of the month, as well as the units that were received as returns.

Ending Inventory = Beginning Inventory + Purchases - Total Cost of Goods Sold

Ending Inventory = 100 units + 200 units - $85,000 = 300 units - $85,000

Since the ending inventory cannot be negative, we need to adjust the calculation.

Ending Inventory = Beginning Inventory + Purchases - Total Cost of Goods Sold = 100 units + 200 units - $85,000 = 300 units - $85,000

To calculate the ending inventory, we need to determine the cost of the ending inventory.

Cost of Ending Inventory = (Beginning Inventory + Purchases) x (Cost per Unit / (Beginning Inventory + Purchases + Cost of Goods Sold))

Cost of Ending Inventory = (100 units + 200 units) x (500 / (100 units + 200 units + $85,000)) = 300 units x (500 / 285,000) = 5.26 units

Since the cost of the ending inventory is less than the number of units in stock, we can assume that the ending inventory is 5.26 units.

Calculating Ending Inventory Value

The ending inventory value is the total value of the units in stock at the end of the month.

Ending Inventory Value = Number of Units in Stock x Cost per Unit = 5.26 units x $500 per unit = $2,630

In conclusion, the Cost of Goods Sold (COGS) for Mitchell Bicycle Shop for the month of March is $85,000, and the ending inventory value is $2,630. The company's use of the periodic method for inventory has allowed it to accurately calculate the COGS and ending inventory, providing valuable insights into its financial performance.

Based on the calculations, we recommend that Mitchell Bicycle Shop:

Monitor inventory levels: The company should closely monitor its inventory levels to ensure that it does not overstock or understock its products.
Adjust pricing: The company may want to consider adjusting its pricing strategy to reflect the changing market conditions and customer preferences.
Improve supply chain management: The company should focus on improving its supply chain management to reduce costs and increase efficiency.

By implementing these recommendations, Mitchell Bicycle Shop can improve its financial performance, increase customer satisfaction, and maintain its competitive edge in the market.
Mitchell Bicycle Shop: Calculating Cost of Goods Sold and Ending Inventory - Q&A

In our previous article, we calculated the Cost of Goods Sold (COGS) and ending inventory for Mitchell Bicycle Shop for the month of March. In this article, we will address some of the frequently asked questions related to the calculation of COGS and ending inventory.

Q: What is the periodic method of inventory valuation?

A: The periodic method of inventory valuation is a method of valuing inventory at the end of each accounting period. It involves calculating the cost of goods sold and the ending inventory at the end of each period, rather than at the end of the year.

Q: What is the difference between the periodic method and the perpetual method of inventory valuation?

A: The perpetual method of inventory valuation involves valuing inventory at the end of each day, rather than at the end of each accounting period. It is a more accurate method of inventory valuation, but it is also more time-consuming and expensive to implement.

Q: How do I calculate the cost of goods sold using the periodic method?

A: To calculate the cost of goods sold using the periodic method, you need to follow these steps:

Calculate the beginning inventory.
Calculate the purchases.
Calculate the total cost of goods available for sale.
Calculate the cost of goods sold.
Calculate the ending inventory.

Q: What is the formula for calculating the cost of goods sold using the periodic method?

A: The formula for calculating the cost of goods sold using the periodic method is:

COGS = Beginning Inventory + Purchases - Ending Inventory

Q: How do I calculate the ending inventory using the periodic method?

A: To calculate the ending inventory using the periodic method, you need to follow these steps:

Calculate the beginning inventory.
Calculate the purchases.
Calculate the total cost of goods available for sale.
Calculate the cost of goods sold.
Calculate the ending inventory.

Q: What is the formula for calculating the ending inventory using the periodic method?

A: The formula for calculating the ending inventory using the periodic method is:

Ending Inventory = Beginning Inventory + Purchases - COGS

Q: What is the difference between the cost of goods sold and the cost of goods available for sale?

A: The cost of goods sold is the cost of the goods that were sold during the period, while the cost of goods available for sale is the total cost of the goods that were available for sale during the period.

Q: How do I calculate the cost of goods available for sale?

A: To calculate the cost of goods available for sale, you need to follow these steps:

Calculate the beginning inventory.
Calculate the purchases.
Calculate the total cost of goods available for sale.

Q: What is the formula for calculating the cost of goods available for sale?

A: The formula for calculating the cost of goods available for sale is:

Cost of Goods Available for Sale = Beginning Inventory + Purchases

In conclusion, the periodic method of inventory valuation is a widely used method of valuing inventory at the end of each accounting period. It involves calculating the cost of goods sold and the ending inventory at the end of each period, rather than at the end of the year. By following the steps outlined in this article, you can calculate the cost of goods sold and ending inventory using the periodic method.

Based on the calculations, we recommend that Mitchell Bicycle Shop:

Monitor inventory levels: The company should closely monitor its inventory levels to ensure that it does not overstock or understock its products.
Adjust pricing: The company may want to consider adjusting its pricing strategy to reflect the changing market conditions and customer preferences.
Improve supply chain management: The company should focus on improving its supply chain management to reduce costs and increase efficiency.

By implementing these recommendations, Mitchell Bicycle Shop can improve its financial performance, increase customer satisfaction, and maintain its competitive edge in the market.