A Particular Production Process Requires Two Types of Raw Materials

question 99

Essay

A particular production process requires two types of raw materials to produce the end product. Each unit of finished product requires three units of raw material A and 2 units of raw material B, plus processing costs of $35. The following provides information on inventories at fiscal 2019 year-end:
$\begin{array} { | l | r | r | r | r | } \hline \text { Inventoryitem } & & & \begin{array} { r } \text { Replacement } \\\text { cost }\end{array} & \begin{array} { r } \text { Net realizable } \\\text { value }\end{array} \\\hline \text { Finished goods } & \text { \# units } & \text { Cost per unit } & \text { NA } & 161 \\\hline \text { Raw material A } & 800 & 181 & 17 & \text { NA } \\\hline \text { Raw material B } & 150 & 10 & 53 & \text { NA } \\\hline\end{array}$
Required:
a. Evaluate these inventories to determine the amount of write-down, if any.
b. If the entry required in part (a)is not made in fiscal 2019, what is the effect on
i)2019 and 2020 inventory on the balance sheet
ii)2019 and 2020 cost of goods sold
iii)2019 and 2020 net income
iv)2019 and 2020 retained earnings

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Definitions:

Wealth Distribution

This refers to the manner in which wealth is shared or distributed among the individuals in a society, often highlighting the disparities between different economic classes.

Race

A social construct used to categorize humans into large and distinct populations based on physical characteristics, ancestry, and genetics.

Middle Class

The middle class is a socio-economic grouping characterized by moderate income levels, educational attainment, and occupational statuses, often considered the backbone of society.

Economic Status

The position of an entity or individual within a social structure, defined by income, wealth, and occupation, influencing their access to resources and power.