Case Study: Yeti Motors Ltd.

Furthermore, according to the 2016 Annual Report, Woolworths’ cost of inventories is determined on a weighted average basis. The weighted average method is perceived to assume that items are of similar nature (Carlon et al. 2016). This method would lead to identical goods being allocated to the same price using the weighted average unit cost, which can then be applied to calculate the cost of ending inventory (Carlon et al. 2016). For this particular case, Woolworths Limited, as a commercial entity, regards the cost of inventory to be difficult to measure due to the high turnover rates and accessibility costs of different products.

are costs that have already been incurred and cannot be changed by any decision made

1. The inventory at your company consists of computer software that the company has developed and is selling. You capitalized (rather than expensed) the cost of duplicating the software, the instruction manuals, and training material that are sold with the software.

Tesla Motors is located primarily out of Palo Alto, California. Its main priority is to push the transition from gasoline cars to electric cars in the immediate future. Their vision states, “Create the most compelling car company of the 21st century by driving the world’s transition to electric vehicles.” In order to take on such a daunting task, Tesla is faced with the creation of an improved car that is affordable and can run solely on electric capabilities. But to begin, Tesla realized that they couldn’t begin with an inexpensive electric car because it would have been too expensive to manufacture. So Tesla began working with an expensive sports car: the Roadster. The idea behind this decision from upper management was that profits from the Roadster would pay for a less expensive car. Once the Roadster was created, about 2,500 models were sold in 2012 and 4,900 in 2013, allowing the car to be the top-selling plug-in electric car in North America. The Model S, the next cheaper version of the electric car, won the 2013 “Motor Trend Car of the Year”, the “World Green Car”, “Car of the Year”, and Time Magazine Best 25 Inventions of the Year 2012 award. With these achievements, Tesla Motors has promised to design and sell high-performance vehicles with highly efficient electric motors with no compromises. Tesla

inventory using the cost method and did not change the method used during the current

4. What inventory method is used to value inventories? Does this method reflect current cost at year-end?

330-10-30330-10-30-1 The primary basis of accounting for inventories is cost, which has been defined generally as the price paid or consideration given to acquire an asset. As applied to inventories, cost means in principle the sum of the applicable expenditures and charges directly or indirectly incurred in bringing an article to its existing condition and location. It is understood to mean acquisition and production cost, and its determination involves many considerations. 330-10-30330-10-30-2 Although principles for the determination of inventory costs may be easily stated, their application, particularly to such inventory items as work in process and finished goods, is difficult because of the variety of considerations in the allocation of costs and charges.

Section 330-10-35-9 states that the most common method is to apply the lower of cost or market to each individual item of inventory. However, Section 330-10-35-10 states that when there is more than one ending product, the application of the lower of cost or market rule to the total of the items included in such major categories may result in the most useful determination of income. Therefore, since the company has three different types of inventory (live hogs ready for sale, developing animals, and processed pork products) and there are different types of ending products (live animals and processed products suchs as loins, hams, and bacon) the lower of cost or market should be applied to the total of the items included in such major categories, i.e. live hogs ready for sale, developing animals, and processed pork products.

Since the Walgreen Company sells products as the retailer or manufacturer it may find the cost of its products increases or rises high the company should use the LIFO method of inventory (Porter & Norton, 2013). According to Hughes and Schwartz (2014), the use of LIFO method of inventory helps a company buys or sells will less taxable income and less income tax payments than FIFO. Porter and Norton also found that when the prices are rising frequently, then a company should use the LIFO method. Therefore, the Walgreen Company uses the Last-In, First-Out (LIFO) Method. It is also equally important that the Walgreen Company should use the LIFO method of Inventory costing because the cost of last accrued items should be assigned firs tot sales

b. The inventory write down recorded, as an expense by the company is $4.4 million. It is measured at lower of cost and net realizable value. Cost is measured by weighted average using standard cost method or

Essentially, we need to compare the costs associated with understocking and overstocking inventory. The costs of understocking, as mentioned above, not only includes short terms losses like the loss of the sale for that item at that time, but also include loss of future business due to customer dissatisfaction. We must also consider that if a particular item is not in stock, the entire purchase orders may be cancelled as per the terms and conditions not being met. The costs of overstocking include the cost to hold that inventory but we also need to consider that it might change if the salvage value of a product leftover depends on the number of units remaining at the end of the season. If we have a lot of product leftover, then the liquidation value might be a lot less. We have to take all these factors into consideration when making the decision of how many

Although inventory is an asset it is recorded as a cost, anything recorded otherwise would be unethical and would be hard to report the cost of goods sold once inventory has been depleted.

Further in my case study I would like to highlight the main points of the collaboration with the abovementioned companies due to key role of each of them in business development and innovation process of Tesla Motors.

To account for inventory, the company uses, first in first out policy. Property plant and equipment are recorded at cost less the accumulated depreciation amount. Depreciation is charged on straight line method