Question: You know these facts about a company’s prior calendar year (or prior year):

• Beginning inventory: 100 units at $10 each

• Ending inventory: 50 units at $9 each

• Inventory purchased for resale during the year: $2,000

What can you calculate using this information? Select all that apply:

1. Gross sales
2. Net profit
3. Contribution margin
4. Cost of goods sold
5. None of the above

---

Answer. Step-by-Step Analysis:

1. Calculate Key Figures:

– Beginning Inventory Value:

$$100\text{ units}\times \$10=\$1,000$$

– Ending Inventory Value:

$$50\text{ units}\times \$9=\$450$$

– Purchases During the Year:

$$\$2,000$$

---

2. Evaluate Each Answer Choice:

1. Gross Sales:

• Definition: Gross sales are the total sales revenue before any returns, allowances, or discounts.
• Required Information: Sales price and quantity sold.
• Given Information: We only know inventory values and purchases, not sales data.
• Conclusion:
  ❌ We cannot calculate gross sales using this information about the company’s prior calendar year.

---

2. Net Profit:

• Definition: Net profit is total revenue minus total expenses.
• Required Information: Sales revenue, cost of goods sold (COGS), and all operating expenses.
• Given Information: We do not have sales revenue or complete expense data from the company’s prior year.
• Conclusion:
  ❌ We cannot calculate net profit using this information.

---

3. Contribution Margin:

• Definition: Contribution margin is sales revenue minus variable costs.
• Required Information: Sales revenue and variable costs.
• Given Information: We do not have sales revenue or variable cost details.
• Conclusion:
  ❌ We cannot calculate the contribution margin using the provided information.

---

4. Cost of Goods Sold (COGS):

• Definition: COGS represents the direct costs of producing or purchasing goods sold by a business.
• Formula:

$$\text{COGS}=\text{Beginning Inventory}+\text{Purchases}-\text{Ending Inventory}$$

• Calculation:

$$\text{COGS}=\$1,000+\$2,000-\$450=\$2,550$$

• Conclusion:
  ✅ We can calculate COGS using this information about the company’s prior year, and the calculated value is $2,550.

---

5. None of the Above:

• Since we can calculate COGS, the answer “None of the Above” is not valid.
• Conclusion:
  ❌ We cannot select “None of the Above.”

---

Final Answer:

The correct choice is:

✅ 4: Cost of Goods Sold