The question states all inventory was sold prior to the year in question, then goes on to say that subsequently all inventory is purchased evenly throughout the year. The question asks about Gross Profit Margin in temporal versus all current, i put the same due to the fact that since temporal is historic for COGS and all current is average, the two are equivalent due to the fact that historic = average if purchases are even throughout the year. The answer gives the normal “since the currency is depreciating temporal will yield a lower GP margin due to the fact that it uses older exchange rates resulting in not receiving the benefits of the depreciating currency on COGS”. Is this an error? Am i missing something? I can’t find errata for 2009 because it was whiped out for 2010
Check the Errata those test books are great but they also have allot of bo-bo’s.
Seriously, does nobody read? No offense cpepin, its just every time i type something someone makes a statement that is outlined above. The errata is not available because its 2009, thats the first thing i checked.
markCFAIL Wrote: ------------------------------------------------------- > Seriously, does nobody read? No offense cpepin, > its just every time i type something someone makes > a statement that is outlined above. The errata is > not available because its 2009, thats the first > thing i checked. how bout this. it says “all inventory on hand at beginning of year was sold during 2008”. when calculatoing COGS, you link it to the actual transaction that created the expense. when i read the question i see it that, there was inventory purchased prior to 2008 which was at a higher ex change rate. the selling of this inventory creates the COGS at the higher ex-rate. however, also during the year there was inventory purchased using an average ex-change rate, hoewver this hasn’t been sold, rather this is ending inventory. apart from that, i agree with your first post
Good catch, what a tricky fucking question. If it had been LIFO my logic would be correct (assuming they only sold what they purchased, and no more, i.e. LIFO layer liquidation), i just kept thinking “all new inventory, average purchase”, forgot that since it’s FIFO and they SOLD stuff at beginning of 08, its cost is related to older inventory before the currency had depreciated. The inventory itself would be equivalent under either method since it is related to the purchase which was even throughout the year, and not the sale. What a tricky damn question