Perpetual Inventory System And Inventory Valuation Methods

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Week 3 Discussions and Required Resources

Part 1 and Part 2 must be at least 200 words

 

Part 1: Perpetual Inventory System

 

Present a detailed explanation of the recording of purchases under a perpetual inventory system. Use hypothetical figures to illustrate the perpetual inventory     system. After presenting your hypothetical figures, discuss how a perpetual     inventory system is different from a periodic inventory system. Your answer     should illustrate understanding of the perpetual inventory system.

Part 2: Inventory Valuation Methods

 

 

Identify the differences   between F.I.F.O., L.I.F.O., and the average-cost method of   inventory valuation.  Be sure to include the effects of each method   on cost of goods sold and net income in   your answer. Also discuss the differences between the physical movement of   goods and cost flow assumptions. Your answer should illustrate understanding   of the three major inventory valuation methods, and the relationship between   physical inventory flow and cost flow assumptions.

Required Resource

Text

Kimmel, P. D., Weygandt, J. J., & Kieso, D. E. (2016). Financial accounting: Tools for business decision making (8th ed.). Retrieved from https://content.ashford.edu/

Chapter 5: Merchandising Operations and the Multiple-Step Income Statement

Chapter 6: Reporting and Analyzing Inventory

(Chapters 5 & 6 are in the attachments) 

Recommended Resources

Article

Bloom, R., & Cenker, W. J. (2008, December 31). The death of LIFO?. Journal of Accounting. Retrieved from http://www.journalofaccountancy.com/issues/2009/jan/deathoflifo.htm

Website

Textbook Student Companion Site .  http://bcs.wiley.com/he-bcs/Books?action=index&itemId=1118953908&bcsId=9831

Review the PowerPoint presentations for Chapter 5 and Chapter 6 found on the textbook publisher’s website.

(Chapters 5 & 6 PowerPoints are in the attachments)

Week 3 Discussions and Required Resources

Part 1 and Part 2 must be at least 200 words

 

Part 1: Perpetual Inventory System

 

Present a detailed explanation of the recording of purchases under a perpetual inventory system. Use hypothetical figures to illustrate the perpetual inventory     system. After presenting your hypothetical figures, discuss how a perpetual     inventory system is different from a periodic inventory system. Your answer     should illustrate understanding of the perpetual inventory system.

Part 2: Inventory Valuation Methods

 

 

Identify the differences   between F.I.F.O., L.I.F.O., and the average-cost method of   inventory valuation.  Be sure to include the effects of each method   on cost of goods sold and net income in   your answer. Also discuss the differences between the physical movement of   goods and cost flow assumptions. Your answer should illustrate understanding   of the three major inventory valuation methods, and the relationship between   physical inventory flow and cost flow assumptions.

Required Resource

Text

Kimmel, P. D., Weygandt, J. J., & Kieso, D. E. (2016). Financial accounting: Tools for business decision making (8th ed.). Retrieved from https://content.ashford.edu/

Chapter 5: Merchandising Operations and the Multiple-Step Income Statement

Chapter 6: Reporting and Analyzing Inventory

(Chapters 5 & 6 are in the attachments) 

Recommended Resources

Article

Bloom, R., & Cenker, W. J. (2008, December 31). The death of LIFO?. Journal of Accounting. Retrieved from http://www.journalofaccountancy.com/issues/2009/jan/deathoflifo.htm

Website

Textbook Student Companion Site .  http://bcs.wiley.com/he-bcs/Books?action=index&itemId=1118953908&bcsId=9831

Review the PowerPoint presentations for Chapter 5 and Chapter 6 found on the textbook publisher’s website.

(Chapters 5 & 6 PowerPoints are in the attachments)

 
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Financial and Managerial Accounting

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Managerial Accounting 1B

 

Financial and Managerial Accounting

 

Chapter 19

 

1.

 

Exercise 19-1 Income reporting under absorption costing and variable costing L.O. P2

 

Adams Company, a manufacturer of in-home decorative fountains, began operations on September 1 of the current year. Its cost and sales information for this year follows.

 

 

 

       
  Production costs      
     Direct materials $ 40   per unit
     Direct labor $ 60   per unit
     Overhead costs for the year      
         Variable overhead $ 3,000,000  
         Fixed overhead $ 7,000,000  
  Nonproduction costs for the year      
     Variable selling and administrative $ 770,000  
     Fixed selling and administrative $ 4,250,000  
  Production and sales for the year      
     Units produced   100,000  units
     Units sold   70,000  units
     Sales price per unit $ 350  per unit

 

 

 

1. Prepare an income statement for the company using absorption costing. (Input all amounts as positive values except net loss which should be indicated with a minus sign. Omit the “$” sign in your response.)

 

 

 

 

 

2. Prepare an income statement for the company using variable costing. (Input all amounts as positive values except net loss which should be indicated with a minus sign. Omit the “$” sign in your response.)

 

 

 

 

 

3. Under what circumstance(s) is reported income identical under both absorption costing and variable costing?

 

 

 

 

 

Exercise 19-4 Income reporting under absorption costing and variable costing L.O. P2

 

[The following information applies to the questions displayed below.]

 

Woodson Company, a producer of solid oak tables, reports the following data from its current year operations, which is its second year of business.

 

 

 

       
  Sales price per unit $ 320  per unit
  Units produced this year   115,000  units
  Units sold this year   118,000  units
  Units in beginning-year inventory   3,000  units
  Beginning inventory costs      
       Variable (3,000 units × $135) $ 405,000  
       Fixed (3,000 units × $80)   240,000  
 
 
       Total $ 645,000  
  Production costs this year      
       Direct materials $ 40  per unit
       Direct labor $ 62  per unit
       Overhead costs this year      
           Variable overhead $ 3,220,000  
           Fixed overhead $ 7,400,000  
  Nonproduction costs this year      
       Variable selling and administrative $ 1,416,000  
       Fixed selling and administrative   4,600,000  

 

 

 

 

 

2.Exercise 19-4 Part 1

 

1. Prepare the current year income statement for the company using absorption costing. (Input all amounts as positive values except net loss which should be indicated with a minus sign. Leave no cells blank – be certain to enter “0” wherever required. Omit the “$” sign in your response.)

 

 

 

3.Exercise 19-4 Part 2

 

2. Prepare the current year income statement for the company using variable costing. (Input all amounts as positive values except net loss which should be indicated with a minus sign. Leave no cells blank – be certain to enter “0” wherever required. Omit the “$” sign in your response.)

 

 

 

4.Exercise 19-6 Converting variable costing income to absorption costing income L.O. P2, P4

 

Lyon Furnaces prepares the income statement under variable costing for its managerial reports, and it prepares the income statement under absorption costing for external reporting. For its first month of operations, 375 furnaces were produced and 225 were sold; this left 150 furnaces in ending inventory. The income statement information under variable costing follows.

 

 

 

     
  Sales (225 × $1,600) $ 360,000
  Variable production cost (225 × $625)   140,625
  Variable selling and administrative expenses (225 × $65)   14,625
 
  Contribution margin   204,750
  Fixed overhead cost   56,250
  Fixed selling and administrative expense   75,000
 
  Net income $ 73,500
 

 

 

 

1. Prepare this company’s income statement for its first month of operations under absorption costing.(Input all amounts as positive values except net loss which should be indicated with a minus sign. Omit the “$” sign in your response.)

 

 

 

5.

 

Exercise 19-9 Contribution margin format income statement L.O. P3

 

Polarix is a retailer of ATVs (all terrain vehicles) and accessories. An income statement for its Consumer ATV Department for the current year follows. ATVs sell, on average, for $3,800. Variable selling expenses are $270 each. The remaining selling expenses are fixed. Administrative expenses are 40% variable and 60% fixed. The company does not manufacture its own ATVs; it purchases them from a supplier for $1,830 each.

 

 

 

POLARIX
Income Statement—Consumer ATV Department
For Year Ended December 21, 2011
  Sales     $ 646,000
  Cost of goods sold       311,100
     
  Gross margin       334,900
  Operating expenses        
      Selling expenses $ 135,000    
      Administrative expenses   59,500   194,500
 
  Net income     $ 140,400
     

 

 

 

Required:

 

 

 

1. Prepare an income statement for this current year using the contribution margin format. (Input all amounts as positive values except net loss which should be indicated with a minus sign. Omit the “$” sign in your response.)

 

 

 

 

 

2. For each ATV sold during this year, what is the contribution toward covering fixed expenses and that toward earning income? (Omit the “$” sign in your response.)

 

 

 

  Contribution margin per ATV  

 

6.

 

Exercise 19-11 Absorption costing and over-production L.O. C2

 

Rourke Inc. reports the following annual cost data for its single product.

 

 

 

       
  Normal production and sales level   60,000  units
  Sales price $ 56.00  per unit
  Direct materials $ 9.00  
  Direct labor $ 6.50  per unit
  Variable overhead $ 11.00  per unit
  Fixed overhead $ 720,000  in total

 

 

 

If Rourke increases its production to 80,000 units, while sales remain at the current 60,000 unit level, by how much would the company’s gross margin increase or decrease under absorption costing? Assume the company has idle capacity to double current production. (Omit the “$” sign in your response.)

 

 

 

  Gross margin    

 

7.Problem 19-1A Variable costing income statement and conversion to absorption costing income L.O. P2, P4

 

Torres Company began operations this year. During this first year, the company produced 100,000 units and sold 80,000 units. The absorption costing income statement for its first year of operations follows.

 

 

 

 
  Sales (80,000 units × $50 per unit)     $ 4,000,000
  Cost of goods sold        
     Beginning inventory $ 0    
     Cost of goods manufactured (100,000 units × $30 per unit)   3,000,000    
 
   
     Cost of good available for sale   3,000,000    
     Ending inventory (20,000 × $30)   600,000    
 
   
     Cost of goods sold       2,400,000
     
  Gross margin       1,600,000
  Selling and administrative expenses       530,000
     
  Net income     $ 1,070,000
     

 

 

 

Additional Information

 

 

 

a. Selling and administrative expenses consist of $350,000 in annual fixed expenses and $2.25 per unit in variable selling and administrative expenses.
b. The company’s product cost of $30 per unit is computed as follows.

 

 

 

 
  Direct materials $ 5  per unit
  Direct labor $ 14  per unit
  Variable overhead $ 2  per unit
  Fixed overhead ($900,000 / 100,000 units) $ 9  per unit

 

 

 

Required:

 

 

 

1. Prepare an income statement for the company under variable costing. (Input all amounts as positive values except net loss which should be indicated with a minus sign. Omit the “$” sign in your response.)
 
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Perpetual: Income effects of inventory methods LO A1

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Exercise 5-4 Perpetual: Income effects of inventory methods LO A1

Laker Company reported the following January purchases and sales data for its only product.
Date Activities Units Acquired at Cost Units Sold at Retail
Jan. 1 Beginning inventory 230  units  @  $8.60 = $ 1,978
Jan. 10 Sales 130  units  @$16.60
Jan. 20 Purchase 300  units  @  $7.60 = 2,280
Jan. 25 Sales 225  units  @$16.60
Jan. 30 Purchase 170  units  @  $6.60 = 1,122
Totals 700  units $ 5,380 355  units
Laker uses a perpetual inventory system. For specific identification, ending inventory consists of 345 units, where 170 are from the January 30 purchase, 80 are from the January 20 purchase, and 95 are from beginning inventory.
1. Complete comparative income statements for the month of January for Laker Company for the four inventory methods. Assume expenses are $2,400, and that the applicable income tax rate is 39%. (Do not round your Intermediate calculations.)

 

 

2. Which method yields the highest net income?
[removed] Specific identification
[removed] LIFO
[removed] FIFO
[removed] Weighted average

 

3. Does net income using weighted average fall between that using FIFO and LIFO?
[removed] Yes
[removed] No

 

4. If costs were rising instead of falling, which method would yield the highest net income?
[removed] Weighted average
[removed] LIFO
[removed] Specific identification
[removed] FIFO

 

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Persona

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Competencies

In this project, you will demonstrate your mastery of the following competencies:

  • Apply elements of the marketing mix to inform business decisions that support organizational objectives
  • Determine appropriate marketing and communication distribution channels
  • Explain how marketing decisions are made to target the consumer

Scenario

Chocolate Bliss started as a small, family-owned store in Seattle, Washington in 1976. While once a boutique chocolatier selling handmade “secret family recipe” chocolate bonbons, the company today has a wider variety of product offerings including boxed chocolate candies, chocolate baking products, and carob (chocolate alternative) candies and health bars. Chocolate Bliss products are sold online and in their stores to consumers and to other businesses, specifically grocery stores, throughout the Northwest.

The company has maintained its “secret family recipe” brand even as it has expanded its product offerings, and today enjoys strong brand awareness in the states where it is sold.

The company’s primary competitors are:

  • Ghirardelli Chocolate Company
    • Chocolate Bliss’s higher-price range baking products, sold to grocery stores, compete directly with Ghirardelli.
    • Chocolate Bliss also competes with Ghirardelli for its boxed chocolate candies sold in their stores and online to consumers, and sold to grocery stores.
  • Nestlé
    • Chocolate Bliss’s mid-price range baking products, sold to grocery stores, compete directly with Nestlé.
  • Rise Bar
    • Chocolate Bliss competes with Rise Bar for its carob (chocolate alternative) products sold in their stores and online to consumers, and sold to grocery stores.

Chocolate Bliss is financially healthy and has plans to expand into the midwestern United States. This expansion will include the launch of a new product.

You have been with the company for a few years and have been selected to be on the team that will develop a marketing plan for the new product launch. The executives at Chocolate Bliss will use the marketing plan to make decisions about how to best use the marketing budget to ensure a successful product launch, so you need to have sound research and reasoning to support your work that will contribute to developing a marketing plan. You also realize that the marketing plan is not just about a successful product launch; it is about building the Chocolate Bliss brand and positioning the company strongly against its competitors, especially when it comes to price point.

Three chocolate bonbon candies

Directions

  1. Product Selection: Begin by selecting which product you want to be the basis of your entire project. Specifically, choose one of the following products:
    • Gourmet truffles with fruit, herb, and flower extract infusions
    • Semisweet chocolate baking chips
    • “Healthy” carob (chocolate substitute) bars

Then, based on your product selection, complete the components below, which will contribute to the development of a marketing plan. You will use the Marketing Plan Strategy Template in the What to Submit section to help structure your marketing plan submission.

  1. Persona (Target Market): Research the target market (potential buyers) for your chosen product to develop a persona. Specifically, address the following:
    1. Conduct target market research to identify key demographic and psychographic characteristics.
    2. Develop one persona that represents users of your chosen product. Use the Module Two Milestone Worksheet in your Soomo webtext to create your persona.
    3. Draft this portion of the project as part of the Module Two milestone, and after you receive feedback from your instructor, revise your persona as needed for inclusion in your project submission.
  2. Promotion: Recommend marketing communication channels for your chosen product. Specifically, address the following:
    1. Recommend two marketing communication channels for your chosen product. Briefly describe each and explain why they are appropriate based on your persona.
    2. Draft this portion of the project as part of the Module Four milestone, and after you receive feedback from your instructor, revise your marketing communication channel selections as needed for inclusion in your project submission.
  3. Price: Consider how pricing for your chosen product should be set. Specifically, address the following:
    1. Explain how one of the following is used to determine the approach to pricing for any offering.
      • Company profitability
      • Competitor pricing
      • Target market price sensitivity
    2. Identify which one of the four basic pricing strategies you feel is most appropriate for your chosen product and persona from the Module Two milestone. Describe the general advantages and drawbacks of that pricing strategy.
    3. Draft this portion of the project as part of the Module Four milestone, and after you receive feedback from your instructor, revise your pricing strategy selection as needed for inclusion in your project submission.
  4. Place (Distribution Channels): Consider how decisions on distribution channels should be made. Specifically, address the following:
    1. Describe how one recent change in the marketplace (e.g., purchasing habits or social, economic, and political events) has affected distribution of products.
    2. Recommend one potential distribution channel for your chosen product and explain why it is appropriate, given your persona.
    3. Draft this portion of the project as part of the Module Five milestone, and after you receive feedback from your instructor, revise your distribution channel selection as needed for inclusion in your project submission.
  5. Product: Identify considerations for the ways in which your chosen product should be marketed. Specifically, address the following:
    1. Explain, in one to two paragraphs, how your chosen product should be marketed in relation to meeting the needs and wants of your persona (e.g., the features and benefits of your chosen product that directly address your persona’s needs and wants).
      1. Consider how a product you regularly purchase is marketed in terms of consumer needs and wants. What is the marketing message, and what other methods are used to convey the benefits of the product? Use this as a guide to describe how you would suggest marketing your chosen product to your persona.
    2. Describe, in one to two paragraphs, how bringing this product to the marketplace can help support and build the company’s brand.
      1. Describe the Chocolate Bliss brand based on the scenario. Explain how offering your chosen product is in alignment with the brand, and how bringing the product to the marketplace will help the company increase awareness of its brand.
  6. Evaluation: Identify how you would evaluate the effectiveness of the marketing plan. Keep in mind that you need to collect data on the target market and the competition.
    1. Identify two specific quantitative data-collection tools you should use and explain, in two to three paragraphs, how they can help you evaluate the marketing plan. Quantitative data comes in the form of numbers.
    2. Identify two specific qualitative data-collection tools you should use and explain, in two to three paragraphs, how they can help you evaluate the marketing plan. Qualitative data comes in the form of words and sentences.
 
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