A Large Manufacturer Recently Changed Its Cost-Flow Assumption Method for Inventories

question 62

Essay

A large manufacturer recently changed its cost-flow assumption method for inventories at the beginning of 2012.The manufacturer has been in operation for almost 40 years,and for the last decade,it has reported moderate growth in revenues.The firm changed from the LIFO method to the FIFO method and reported the following information:

Calculate the inventory turnover ratio for 2012 using the LIFO and FIFO cost-flow assumption methods.Explain why the costs assigned to inventory under LIFO at the end of 2011 and 2012 are so much less than they are under FIFO.

Recognize the importance of delivery and possession in the negotiation of negotiable instruments.

Identify the conditions under which a transfer of a negotiable instrument constitutes negotiation.

Understand the distinctions between various types of indorsements and their legal implications.

Comprehend the rights and defenses available to a holder in due course vs. a regular holder.

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Definitions:

Factory Machine Hours

A measure of production time, indicating the total hours that machinery is operated in the manufacturing process.

Power Costs

The expenses incurred by a company for the electricity or energy used in its operations.

Sales Price

The amount of money for which a product or service is sold to the customer.

Contribution Margin

The amount by which sales revenue exceeds variable costs, contributing to covering fixed costs and profit generation.