Answered

The Rainbow Motor Motel is a 50-room facility with a restaurant to accommodate its guests. The motel is open 365 days a year, even on leap years; as Lurena Boucha, the proprietor, closes down the facility every February 29, her birthday, for an all day celebration of four years of successful operations. On the average, 98% of the rooms are available for sale. For the year just ended, the actual number of rooms sold totaled 15,000 and the number of guests for the year totaled 20,000. The projected occupancy rate for the next year is 82% of the available rooms based on past experience. The food information is as follows:

Sales $150,000, Beg Inventory 8,000, Purchases $70,000, Ending Inventory, $ 13,000 Consumption by employees (free of charge) $3,000, Number of checks 64,139. Cost of sales ?

Answer :

AZIKENNAMDIGO

From the information given, the cost of sales is $65,000. See the explanation below.

What is the definition of cost of sales?

Add your initial inventory to the purchases made over the time period, remove that amount from your ending inventory, and that is your cost of sales.

Cost of Sales = (Bi + P) - Ei

Where Bi is Beginning Inventory

P is Purchases; and

Ei is Ending Inventory.

So the derivation of the solution above is?

Beginning Inventory = 8,000

(add)          Purchase = 70,000

Bi + P                          = 78,000

Ending Inventory  = 13,000

Cost of sales = 78,000 - 13,000

= $65,000

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