Question
In: Accounting
Vaughn Company follows the practice of pricing its inventory at the lower-of-cost-or-market, on an individual-item basis....
Vaughn Company follows the practice of pricing its inventory at
the lower-of-cost-or-market, on an individual-item basis.
|
Item No. |
Quantity |
Cost per Unit |
Cost to Replace |
Estimated Selling Price |
Cost of Completion and Disposal |
Normal Profit |
||||||||||||
| 1320 | 1,400 | $3.30 | $3.09 | $4.64 | $0.36 | $1.29 | ||||||||||||
| 1333 | 1,100 | 2.78 | 2.37 | 3.61 | 0.52 | 0.52 | ||||||||||||
| 1426 | 1,000 | 4.64 | 3.81 | 5.15 | 0.41 | 1.03 | ||||||||||||
| 1437 | 1,200 | 3.71 | 3.19 | 3.30 | 0.26 | 0.93 | ||||||||||||
| 1510 | 900 | 2.32 | 2.06 | 3.35 | 0.82 | 0.62 | ||||||||||||
| 1522 | 700 | 3.09 | 2.78 | 3.91 | 0.41 | 0.52 | ||||||||||||
| 1573 | 3,200 | 1.85 | 1.65 | 2.58 | 0.77 | 0.52 | ||||||||||||
| 1626 | 1,200 | 4.84 | 5.36 | 6.18 | 0.52 | 1.03 | ||||||||||||
From the information above, determine the amount of Vaughn Company
inventory.
| The amount of Vaughn Company’s inventory |
Solutions
Expert Solution
Let us begin by calculating the Net Realizable value(NRV) and Net Realizable value less normal profit.
| Item no. |
(a) Estimated selling price ($) |
(b) Cost of completion and disposal ($) |
(c) (a-b) |
(d) Normal profit ($) |
(e) NRV less normal profit ($) (c-d) |
| 1320 | 4.64 | 0.36 | 4.28 | 1.29 | 2.99 |
| 1333 | 3.61 | 0.52 | 3.09 | 0.52 | 2.57 |
| 1426 | 5.15 | 0.41 | 4.74 | 1.03 | 3.71 |
| 1437 | 3.30 | 0.26 | 3.04 | 0.93 | 2.11 |
| 1510 | 3.35 | 0.82 | 2.53 | 0.62 | 1.91 |
| 1522 | 3.91 | 0.41 | 3.5 | 0.52 | 2.98 |
| 1573 | 2.58 | 0.77 | 1.81 | 0.52 | 1.29 |
| 1626 | 6.18 | 0.52 | 5.66 | 1.03 | 4.63 |
Market value is taken to be the middle value of NRV, NRV less normal profit and the cost to replace
Let us calculate the value of inventory using lower of cost or market value rule on an individual item basis :
| Item no. | (a) NRV ($) | (b) NRV less normal profit ($) | (c) Cost to replace ($) |
(d) Market value ($) [ middle of a, b and c ] |
(e) Cost per unit ($) |
(f) Inventory value per unit ($) [ lower of d and e ] |
(g) Quantity |
Total value of inventory ($) [ f * g ] |
| 1320 | 4.28 | 2.99 | 3.09 | 3.09 | 3.30 | 3.09 | 1,400 | 4,326 |
| 1333 | 3.09 | 2.57 | 2.37 | 2.57 | 2.78 | 2.57 | 1,100 | 2,827 |
| 1426 | 4.74 | 3.71 | 3.81 | 3.81 | 4.64 | 3.81 | 1,000 | 3,810 |
| 1437 | 3.04 | 2.11 | 3.19 | 3.04 | 3.71 | 3.04 | 1,200 | 3,648 |
| 1510 | 2.53 | 1.91 | 2.06 | 2.06 | 2.32 | 2.06 | 900 | 1,854 |
| 1522 | 3.5 | 2.98 | 2.78 | 2.98 | 3.09 | 2.98 | 700 | 2,086 |
| 1573 | 1.81 | 1.29 | 1.65 | 1.65 | 1.85 | 1.65 | 3,200 | 5,280 |
| 1626 | 5.66 | 4.63 | 5.36 | 5.36 | 4.84 | 4.84 | 1,200 | 5,808 |
| Total | 29,639 |
The amount of Vaughn Company's inventory is $29,639
ekkarill92 answered 1 year agoRelated Solutions
Blue Company follows the practice of pricing its inventory at the lower-of-cost-or-market, on an individual-item basis....
Blue Company follows the practice of pricing its inventory at
the lower-of-cost-or-market, on an individual-item basis.
Item No.
Quantity
Cost per Unit
Cost to Replace
Estimated Selling Price
Cost of Completion and Disposal
Normal Profit
1320
1,300
$3.23
$3.03
$4.55
$0.35
$1.26
1333
1,000
2.73
2.32
3.54
0.51
0.51
1426
900
4.55
3.74
5.05
0.40
1.01
1437
1,100
3.64
3.13
3.23
0.25
0.91
1510
800
2.27
2.02
3.28
0.81
0.61
1522
600
3.03
2.73
3.84
0.40
0.51
1573
3,100
1.82...
Martinez Company follows the practice of pricing its inventory at the lower-of-cost-or-market, on an individual-item basis....
Martinez Company follows the practice of pricing its inventory
at the lower-of-cost-or-market, on an individual-item
basis.
Item No.
Quantity
Cost per Unit
Cost to Replace
Estimated Selling Price
Cost of Completion and Disposal
Normal Profit
1320
1,600
$3.46
$3.24
$4.86
$0.38
$1.35
1333
1,300
2.92
2.48
3.78
0.54
0.54
1426
1,200
4.86
4.00
5.40
0.43
1.08
1437
1,400
3.89
3.35
3.46
0.27
0.97
1510
1,100
2.43
2.16
3.51
0.86
0.65
1522
900
3.24
2.92
4.10
0.43
0.54
1573
3,400
1.94...
Martinez Company follows the practice of pricing its inventory at the lower-of-cost-or-market, on an individual-item basis....
Martinez Company follows the practice of pricing its inventory
at the lower-of-cost-or-market, on an individual-item
basis.
Item No.
Quantity
Cost per Unit
Cost to Replace
Estimated Selling Price
Cost of Completion and Disposal
Normal Profit
1320
1,600
$3.46
$3.24
$4.86
$0.38
$1.35
1333
1,300
2.92
2.48
3.78
0.54
0.54
1426
1,200
4.86
4.00
5.40
0.43
1.08
1437
1,400
3.89
3.35
3.46
0.27
0.97
1510
1,100
2.43
2.16
3.51
0.86
0.65
1522
900
3.24
2.92
4.10
0.43
0.54
1573
3,400
1.94...
Skysong Company follows the practice of pricing its inventory at the lower-of-cost-or-market, on an individual-item basis....
Skysong Company follows the practice of pricing its inventory at
the lower-of-cost-or-market, on an individual-item basis.
Item No.
Quantity
Cost per Unit
Cost to Replace
Estimated Selling Price
Cost of Completion and Disposal
Normal Profit
1320
1,500
$3.39
$3.18
$4.77
$0.37
$1.33
1333
1,200
2.86
2.44
3.71
0.53
0.53
1426
1,100
4.77
3.92
5.30
0.42
1.06
1437
1,300
3.82
3.29
3.39
0.27
0.95
1510
1,000
2.39
2.12
3.45
0.85
0.64
1522
800
3.18
2.86
4.03
0.42
0.53
1573
3,300
1.91...
Sarasota Company follows the practice of pricing its inventory at the lower-of-cost-or-market, on an individual-item basis....
Sarasota Company follows the practice of pricing its inventory
at the lower-of-cost-or-market, on an individual-item
basis.
Item No.
Quantity
Cost per Unit
Cost to Replace
Estimated Selling Price
Cost of Completion and Disposal
Normal Profit
1320
1,600
$3.42
$3.21
$4.82
$0.37
$1.34
1333
1,300
2.89
2.46
3.75
0.54
0.54
1426
1,200
4.82
3.96
5.35
0.43
1.07
1437
1,400
3.85
3.32
3.42
0.27
0.96
1510
1,100
2.41
2.14
3.48
0.86
0.64
1522
900
3.21
2.89
4.07
0.43
0.54
1573
3,400
1.93...
Swifty Company follows the practice of pricing its inventory at the lower-of-cost-or-market, on an individual-item basis....
Swifty Company follows the practice of pricing its inventory at
the lower-of-cost-or-market, on an individual-item basis.
Item No.
Quantity
Cost per Unit
Cost to Replace
Estimated Selling Price
Cost of Completion and Disposal
Normal Profit
1320
1,400
$3.30
$3.09
$4.64
$0.36
$1.29
1333
1,100
2.78
2.37
3.61
0.52
0.52
1426
1,000
4.64
3.81
5.15
0.41
1.03
1437
1,200
3.71
3.19
3.30
0.26
0.93
1510
900
2.32
2.06
3.35
0.82
0.62
1522
700
3.09
2.78
3.91
0.41
0.52
1573
3,200
1.85...
Kingbird Company follows the practice of pricing its inventory at the lower-of-cost-or-market, on an individual-item basis....
Kingbird Company follows the practice of pricing its inventory
at the lower-of-cost-or-market, on an individual-item
basis.
Item No.
Quantity
Cost per Unit
Cost to Replace
Estimated Selling Price
Cost of Completion and Disposal
Normal Profit
1320
1,500
$3.87
$3.63
$5.45
$0.42
$1.51
1333
1,200
3.27
2.78
4.24
0.61
0.61
1426
1,100
5.45
4.48
6.05
0.48
1.21
1437
1,300
4.36
3.75
3.87
0.30
1.09
1510
1,000
2.72
2.42
3.93
0.97
0.73
1522
800
3.63
3.27
4.60
0.48
0.61
1573
3,300
2.18...
Tamarisk Company follows the practice of pricing its inventory at the lower-of-cost-or-market, on an individual-item basis....
Tamarisk Company follows the practice of pricing its inventory
at the lower-of-cost-or-market, on an individual-item basis.
Item No.
Quantity
Cost Per
Unit
Cost to
Replace
Estimated
Selling Price
Cost of
Completion
& Disposal
Normal Profit
1320
2000
3.68
3.45
5.18
0.40
1.44
1333
1700
3.11
2.65
4.03
0.58
0.58
1426
1600
5.18
4.26
5.75
0.46
1.15
1437
1800
4.14
3.57
3.68
0.29
1.04
1510
1500
2.59
2.30
3.74
0.92
0.69
1522
1300
3.45
3.11
4.37
0.46
0.58
1573
3800
2.07...
Whispering Company follows the practice of pricing its inventory at the lower-of-cost-or-market, on an individual-item basis....
Whispering Company follows the practice of pricing its inventory
at the lower-of-cost-or-market, on an individual-item basis.
Item No.
Quantity
Cost per Unit
Cost to Replace
Estimated Selling Price
Cost of Completion and Disposal
Normal Profit
1320
1,800
$3.55
$3.33
$5.00
$0.39
$1.39
1333
1,500
3.00
2.55
3.89
0.56
0.56
1426
1,400
5.00
4.11
5.55
0.44
1.11
1437
1,600
4.00
3.44
3.55
0.28
1.00
1510
1,300
2.50
2.22
3.61
0.89
0.67
1522
1,100
3.33
3.00
4.22
0.44
0.56
1573
3,600
2.00...
Splish Company follows the practice of pricing its inventory at the lower-of-cost-or-market, on an individual-item basis....
Splish Company follows the practice of pricing its inventory at
the lower-of-cost-or-market, on an individual-item basis.
Item No.
Quantity
Cost per Unit
Cost to Replace
Estimated Selling Price
Cost of Completion and Disposal
Normal Profit
1320
1,600
$3.97
$3.72
$5.58
$0.43
$1.55
1333
1,300
3.35
2.85
4.34
0.62
0.62
1426
1,200
5.58
4.59
6.20
0.50
1.24
1437
1,400
4.46
3.84
3.97
0.31
1.12
1510
1,100
2.79
2.48
4.03
0.99
0.74
1522
900
3.72
3.35
4.71
0.50
0.62
1573
3,400
2.23...
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