Question

Boeing Corporation is facing an inventory problem. They are essnentially making too many planes, causing them to overfill where they can keep them. The manufacturers of the engines are being forced to work very fast and are not keeping up with production of the planes. What times/accounts in boeings financial statments would be affected by the inventory problem?

Answer 1

Boeing corporation is making planes at a very high pace whereas there are no corresponding sales /negligible sales. Since the manufacturing of planes is too high there will be huge costs and hence adverse condition of financial statements. Affected accounts will be:

• Raw material account: Due to excessive manufacturing focused vision, there will be huge number of transactions in raw material account and also leading to huge expenses in financial statements.
• Work in process account : number of transactions in such account will also be huge as manufacturers are forced to work hard thus leading to faster conversion of raw material into finished products
• Finished goods account: There will be huge balance in this account as Boeing corporation is being manufacturing focused and huge inventory is lying in the organisation.
• Sales account: there will be very less transactions in this account and leading to less revenue generation.

Since Boeing corporation is being manufacturing focused and has huge impact on the inventory leading to more costs of inventory carrying cost and also leading to blockage of funds in the inventory. The overall policy of focusing on manufacturing has adverse impact on financial statements which can be avoided by involving in marketing and sale of products having perfect balanced operating cycle.

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