Calculating Ending Inventory for Erie Jewelers

What is the process to calculate the ending inventory for Erie Jewelers?

Answer:

To calculate the ending inventory for Erie Jewelers, we need to follow these steps:

  1. Calculate the total pairs of Model 407 earrings purchased during the year.
  2. Determine the total cost of the inventory, including the beginning inventory and purchases.
  3. Subtract the number of pairs sold from the total purchased to find the ending inventory.

Calculating Total Pairs of Model 407 Earrings Purchased

The first batch purchased was 150 pairs, and the second batch was 200 pairs, totaling 350 pairs purchased throughout the year.

Determining the Total Cost of Inventory

The cost breakdown is as follows:

  • Beginning Inventory: 100 pairs at $50 per pair = $5,000
  • First Batch: 150 pairs at $53 per pair = $7,950
  • Second Batch: 200 pairs at $56 per pair = $11,200

Total Cost of Inventory: $5,000 + $7,950 + $11,200 = $24,150

Calculating Ending Inventory

Subtract the number of pairs sold (375) from the total purchased (350) to find the ending inventory:

Ending Inventory = 350 - 375 = -25 pairs

Since negative inventory is not possible, the ending inventory is considered zero pairs with a value of $0.

In summary, Erie Jewelers started with 100 pairs of Model 407 earrings, purchased a total of 350 pairs throughout the year with a cost of $24,150, and ended with zero pairs in inventory valued at $0.

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