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Lower of Cost or Market Adjustment Marathon Petroleum Corporation disclosed the following in its 2015 annual report. The company reported revenues and cost of revenues of $72,051 million and $55,583 million respectively in 2015. Inventories are stated at the lower of cost or market. Costs of crude oil, refinery feedstocks and refined products are aggregated on a consolidated basis for purposes of assessing if the LIFO cost basis of these inventories may have to be written down to market values. At December 31, 2015, market values for these inventories, which totaled approximately 4.0 billion gallons, were lower than their LIFO cost basis and, as a result, we recorded an inventory valuation charge of $345 million to cost of revenues to value these inventories at the lower of cost or market. a. Compute gross profit margin for 2015. Round answer to one decimal place (ex: 0.2345 = 23.5%) 22.9 % b. What would gross profit margin and the gross profit margin percentage have been if the company had not had to record the lower of cost or market adjustment? Round answer to one decimal place (ex: 0.2345 23.5%) 23.3 c. At the end of the year, Marathon's LIFO reserve was $684 million. If the company had used FlFO, what would the inventory valuation charge have been? x million 0

Lower of Cost or Market Adjustment Marathon Petroleum Corporation disclosed the following in its 2015 annual report. The company reported revenues and cost of revenues of $72,051 million and $55,583 million respectively in 2015. Inventories are stated at the lower of cost or market. Costs of crude oil, refinery feedstocks and refined products are aggregated on a consolidated basis for purposes of assessing if the LIFO cost basis of these inventories may have to be written down to market values. At December 31, 2015, market values for these inventories, which totaled approximately 4.0 billion gallons, were lower than their LIFO cost basis and, as a result, we recorded an inventory valuation charge of $345 million to cost of revenues to value these inventories at the lower of cost or market. a. Compute gross profit margin for 2015. Round answer to one decimal place (ex: 0.2345 = 23.5%) 22.9 % b. What would gross profit margin and the gross profit margin percentage have been if the company had not had to record the lower of cost or market adjustment? Round answer to one decimal place (ex: 0.2345 23.5%) 23.3 c. At the end of the year, Marathon's LIFO reserve was $684 million. If the company had used FlFO, what would the inventory valuation charge have been? x million 0

Financial Accounting Intro Concepts Meth/Uses
Financial Accounting Intro Concepts Meth/Uses
14th Edition
ISBN:9781285595047
Author:Weil
Publisher:Weil
Chapter9: Working Capital
Section: Chapter Questions
Problem 30E
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Please see the attached image and answer letter C.  Please show how FIFO and LIFO is calclulated as well as the answer to c.

 

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Lower of Cost or Market Adjustment Marathon Petroleum Corporation disclosed the following in its 2015 annual report. The company reported revenues and cost of revenues of $72,051 million and $55,583 million respectively in 2015. Inventories are stated at the lower of cost or market. Costs of crude oil, refinery feedstocks and refined products are aggregated on a consolidated basis for purposes of assessing if the LIFO cost basis of these inventories may have to be written down to market values. At December 31, 2015, market values for these inventories, which totaled approximately 4.0 billion gallons, were lower than their LIFO cost basis and, as a result, we recorded an inventory valuation charge of $345 million to cost of revenues to value these inventories at the lower of cost or market. a. Compute gross profit margin for 2015. Round answer to one decimal place (ex: 0.2345 = 23.5%) 22.9 % b. What would gross profit margin and the gross profit margin percentage have been if the company had not had to record the lower of cost or market adjustment? Round answer to one decimal place (ex: 0.2345 23.5%) 23.3 c. At the end of the year, Marathon's LIFO reserve was $684 million. If the company had used FlFO, what would the inventory valuation charge have been? x million 0
Transcribed Image Text:Lower of Cost or Market Adjustment Marathon Petroleum Corporation disclosed the following in its 2015 annual report. The company reported revenues and cost of revenues of $72,051 million and $55,583 million respectively in 2015. Inventories are stated at the lower of cost or market. Costs of crude oil, refinery feedstocks and refined products are aggregated on a consolidated basis for purposes of assessing if the LIFO cost basis of these inventories may have to be written down to market values. At December 31, 2015, market values for these inventories, which totaled approximately 4.0 billion gallons, were lower than their LIFO cost basis and, as a result, we recorded an inventory valuation charge of $345 million to cost of revenues to value these inventories at the lower of cost or market. a. Compute gross profit margin for 2015. Round answer to one decimal place (ex: 0.2345 = 23.5%) 22.9 % b. What would gross profit margin and the gross profit margin percentage have been if the company had not had to record the lower of cost or market adjustment? Round answer to one decimal place (ex: 0.2345 23.5%) 23.3 c. At the end of the year, Marathon's LIFO reserve was $684 million. If the company had used FlFO, what would the inventory valuation charge have been? x million 0
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