CC$7-1($Algo$)$ Accounting for Changing Inventory Costs $[$LO$7-3,$ LO$7-5]$

In October, Nicole of Nicole$$s Getaway Spa $($NGS$)$ eliminated all existing inventory of cosmetic items. The trouble of ordering and tracking each product line had exceeded the profits earned. In December, a supplier asked her to sell a prepackaged spa kit. Feeling she could manage a single product line, Nicole agreed. NGS would make monthly purchases from the supplier at a cost that included production costs and a transportation charge. The spa would use a perpetual inventory system to keep track of its new inventory.

On December $31,$ NGS purchased $10$ units at a total cost of $$8\mathrm{.}50$ per unit. NGS purchased $30$ more units at $$10\mathrm{.}50$ in February, but returned $5$ defective units to the supplier. In March, NGS purchased $15$ units at $$12\mathrm{.}50$ per unit. In May, $50$ units were purchased at $$12\mathrm{.}50$ per unit; however, NGS took advantage of a $3\mathrm{.}00/10,$ n$/30$ discount from the supplier. In June, NGS sold $50$ units at a selling price of $$11\mathrm{.}40$ per unit and $35$ units at $$9\mathrm{.}40$ per unit.

Required:

$1.$ State whether the transportation cost included in each purchase should be recorded as a cost of the inventory or immediately expensed.

multiple choice

Inventory cost

Immediately expensed

$2.$ Compute the Cost of Goods Available for Sale, Cost of Goods Sold, and Cost of Ending Inventory using the first$-$in$,$ first$-$out $($FIFO$)$ method.

Note: Do not round intermediate calculations. Round final answers to the nearest dollar amount.

$3-$a$.$ Calculate the inventory turnover ratio, using the inventory on hand at December $31,$ as the beginning inventory.

Note: Do not round intermediate calculations. Round your answer to $1$ decimal place.

$3-$b$.$ The supplier reported that the typical inventory turnover ratio was $7\mathrm{.}9.$ How does NGS$\text{'}$s ratio compare?