Period Cost.....

[A_hma_d]

2005 VCAA question.
Please help
State the effect on reported net profit, of treating the delivery cost of $800 as a period cost, if all stock has not been sold by the next reporting date.
Explain your answer.

[Somye]

Already doing trial exams? ....wow

anyway, your net profit would be lower, as the entire 800 would be recorded as an expense instead of an incremental amount if it was used as a product cost.

Example. If you had that cost split over 20 items ($40 each), and ended up only selling 15, your expense would only be $600 using product costing. If you used period, expenses would be overstated by $200, and hence net profit understated by same amount.

[A_hma_d]

Thank you

And could you please also help me with how to calculate net sales???

[Somye]

If you could copy the question here I could help

[A_hma_d]

the stock is iPhones
1st of aug
the balance was 5@$860 and 12@$890
sales of 3@860
so it leaves the firm with 2@$860 and 12@$890
then the firm purchased 10 iphones for $760+76GST
then a debtor returned 5 iPhones, was issued Crn 56 $1250+125GST

[Somye]

sales = 3*860 = 2580
sales returns = 5*860 = 4300
net sales = - 1720

[A_hma_d]

Thank you so much