Windsor Company Reported the Following Summarized Information at the End

question 97

Essay

Windsor Company reported the following summarized information at the end of 2015: The controller of the company is considering a switch from FIFO to average. He has determined that under average, the ending inventory would have been $150,000.
Instructions
a. Restate the above summarized information using average.
b. What effect, if any, would the proposed change have on Windsor's profit and cash flows?
c. If you were an owner of this business, what would your reaction be to this proposed change?

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Definitions:

Time Value

The concept that money available at the present time is worth more than the same amount in the future due to its potential earning capacity.

Option's Market Price

The prevailing price at which an options contract is traded on the market, determined by factors like intrinsic value and time value.

Intrinsic Value

The actual worth of an asset or investment based on its fundamental characteristics, independent of its market value.

Risk-Free Interest

The rate of return on an investment with no risk of financial loss, typically associated with government bonds.