You are provided with the following information for Swag Diamonds Ltd. Swag only carries one brand and

Question:

You are provided with the following information for Swag Diamonds Ltd. Swag only carries one brand and size of diamond-all are identical. Each batch of diamonds purchased is carefully coded and marked with its purchase cost.

Mar. 1 Beginning inventory is 140 diamonds at a cost of $500 per diamond.

3 Purchased 200 diamonds at a cost of $540 each.

5 Sold 170 diamonds for $800 each.

10 Purchased 340 diamonds at a cost of $570 each.

25 Sold 500 diamonds for $850 each.

Instructions

(a) Assuming that Swag Diamonds uses the specific identification method, do the following:

1. Show how Swag Diamonds could maximize its gross profit for the month by selecting which diamonds to sell on March 5 and March 25.

2. Show how Swag Diamonds could minimize its gross profit for the month by selecting which diamonds to sell on March 5 and March 25.

(b) Who are the stakeholders in this situation? Is there anything unethical in choosing which diamonds to sell in a month?

(c) Assuming that Swag Diamonds uses a perpetual inventory system and the average cost method, how much gross profit would Swag Diamonds report? (Round the average unit cost to the nearest cent-two decimal places.)

(d) Which method of cost determination-specific identification or average cost-should Swag Diamonds select? Explain.

Stakeholders
A person, group or organization that has interest or concern in an organization. Stakeholders can affect or be affected by the organization's actions, objectives and policies. Some examples of key stakeholders are creditors, directors, employees,...
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Related Book For  book-img-for-question

Financial Accounting Tools for Business Decision Making

ISBN: 978-1118644942

6th Canadian edition

Authors: Paul D. Kimmel, Jerry J. Weygandt, Donald E. Kieso, Barbara Trenholm, Wayne Irvine

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