Question

Under what circumstances is relative sales value an
appropriate basis for determining the price assigned to
inventory?

Expert Solution

Want to see the full answer?

Check out a sample Q&A here
Blurred answer
Students who’ve seen this question also like:
Intermediate Accounting: Reporting And Analysis
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN: 9781337788281
Author: James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher: Cengage Learning
Not helpful? See similar books
Intermediate Accounting: Reporting And Analysis
Intermediate Accounting: Reporting And Analysis
Inventories: Special Valuation Issues. 14GI
marketing sidebar icon
Want to see this answer and more?
Experts are waiting 24/7 to provide step-by-step solutions in as fast as 30 minutes!*
*Response times may vary by subject and question complexity. Median response time is 34 minutes for paid subscribers and may be longer for promotional offers.

Related Accounting Q&A

Find answers to questions asked by students like you.

Q: What do you understand by rate of markup on cost and rate of markup on selling price, illustrate…

A: Answer: Mark-up is nothing but the difference between a good or service’s selling price and its…

Q: How is standalone selling price defined?

A: Performance Obligation: Performance obligation refers to the obligation that the seller to provide…

Q: Which of the following is the correct calculation of selling price? O a. Cost + Mark-up O b.…

A: Selling price is price at which goods and services are sold to customer. This selling price includes…

Q: What is the proper accounting for volume discounts onsales of products?

A: Volume discounts: It is an incentive to encourage for an increase in business. The seller issue…

Q: Explain how the lower of cost and net realizable value rule is applied to purchase commitments.

A: Purchase Commitments: It refers to the commitments or contract made by a company with its suppliers…

Q: What is the difference between gross profit method & the retail method?

A: Gross profit is described as amount which is computed after reducing cost of goods sold or cost of…

Q: What is the difference between gross profit method & the retail method?

A: Gross Profit Method:-This method estimates the value of inventory by applying historical gross…

Q: What is the difference between gross selling price and invoice price?

A: Invoices are the bill which display the total value of the product purchased. Be it gross selling…

Q: How are the floor and ceiling limits calculated as per the lower of cost or market (LCM) method…

A: LCM that is lower of cost or market value method says that inventory should be valued at a price…

Q: What does an “upstream” sale of inventory refer to and when is the profit recognized?

A: Upstream sale of inventory: When a subsidiary sells goods to a parent company, is referred as…

Q: Describe the approaches to estimate stand-alone selling prices.

A: Click to see the answer

Q: Which one of the following sets of inventory cost flow assumptions is not susceptible to profit…

A: FIFO and average cost methods are considered as the sets of inventory cost flow assumptions that are…

Q: When applying lower of cost or net realizable value under the FIFO, average cost, or specific…

A: The lower of cost or net realizable value method says we should record the inventory at market price…

Q: What does a “downstream” sale of inventory refer to and when is the profit recognized?

A: Downstream sale of inventory: When a parent company transfer goods to any of its subsidiaries, it is…

Q: Explain the accounting for sales with right of return.

A: Definition: Accounting for sales with a right of return: Accounting for sales with the right of…

Q: Explain the accounting for sales with right of return.

A: Click to see the answer

Q: The change in gross profit due to change in quantity sold must be:

A: Budgeted gross profit ratio Sales        792,000 Less: cost of sale        464,000 Gross…

Q: How do you compute the unadjusted cost of goods sold?

A: Cost of goods sold: It can be defined as the total of direct costs that are incurred by the business…

Q: How do you compute the unadjusted cost of goods sold?

A: Cost of Goods Sold: Once the product is manufactured, that product is delivered to customers. The…

Q: Discuss the accounting for sales allowances and howthey relate to the concept of variable…

A: Definition:

Q: amount of cost of sales?

A: (Note: Since you have posted multiple questions, we will solve the first question for you. For the…

Q: Distinguish between the sales value at splitoff method and the NRV method

A: Sales value at split-off method: Sales value at split-off method allocates joint cost to each joint…

Q: Compare and contrast the differences and similarities between Cost of Goods Sold and Net Profit.

A: Cost of goods sold (COGS) represents the direct cost of producing the goods. These are the direct…

Q: The difference between Net sales and Cost of goods sold is referred as _____________.

A: Net Sales means Sales revenue less any sales return, discount and allowances whereas cost of Goods…

Q: Why Sales revenue does not include the residual value?

A: The residual value, also known as salvage value, is the estimated value of a fixed asset at the end…

Q: Explain the argument for and against the use of net price method with respect to purchase discounts?

A: The Net Price Method (NPM) provides information about the purchase discounts lost by the company and…

Q: What is meant by purchase return and sales return?

A: Purchase return:A purchase return is a transaction that occurs when the buyer of the goods (for…

Q: Why does Sales discounts are variable consideration?

A: Variable considerations: Variable consideration refers to the amount that the corporation is…

Q: How are the floor and ceiling limits calculated as per the lower of cost or market (LCM) method…

A: The net realizable value of inventory is the sale price minus any expenditures associated with…

Q: Explain the following assertion: “Price setting generally requires a balance between market forces…

A: Businesses have to make a lot of decisions in running a business one of which is price setting. They…

Q: What would be the sales value or turnover corresponding to the threshold of profitability

A: Sales turnover:  It is the company's total amount of services / products sold over a given period of…

Q: Define and describe the differences between a sales return and a sales allowance

A: Sales revenue: It is the revenue earned by a business on selling the goods or providing services to…

Q: How is the price of an item established in a target pricing contract?

A: Target pricing is the approach which is innovative and used at the initial stage of the new…

Q: A cost - based transfer price considers the cost of producing the goods when determining the price.…

A: At the time of determining the prices of the goods, the cost of goods-producing is required to be…

Q: Conceptually, how would you evaluate a quantity discount offerfrom a supplier?

A: Click to see the answer

Q: What assumption is usually made concerning sales mix inCVP analysis?

A: Sales mix: A proportion of two or more products sold by the company to maximize the profit, that…

Q: What is the percentage of sales approach

A: Percentage of Sales Approach This is an important tool in which the management are using for the…

Q: How can a company track the extent of price discounting on a customer-by-customer basis?

A: Customer profitability analysis is the process of ascertaining the amount of revenue earned from the…

Q: How can a company track the extent of price discounting on a customer-by-customer basis?

A: Customer Profitability Analysis:Customer profitability analysis is the process of ascertaining the…

Q: Describe following:* Market approach* Income approach* Cost approach

A: Market Approach:   Market approach is a method used to assess the value of an asset depending on the…

Q: Distinguish between the sales values at splitoff method and the NRV method.

A: Sales value at split-off method: Sales value at split-off method allocates joint cost to each joint…

Q: Gross profit from sales is the difference between

A: Gross profit means the excess of revenue against the cost of good sold from the operating activity…

Q: What method of inventory valuation should be used for economic decision-making problems?

A: Inventory valuation is necessary for ascertaining the accurate cost of inventory so that accurate…

Q: Which of the following is an opportunity cost? O marginal cost O cost of sales O lost sales cost of…

A: Cost Accounting: It is the process of collecting, recording, analyzing the cost, summarizing cost,…

Q: amount should be reported as cost of goods sold?

A: The inventory should be valued at the lower of cost or net realizable value. The value of inventory…

Q: effect on sales due to change in selling price

A: Let number of units in 2020 = x  Let number of units in 2021 = y   Unit cost in 2020 = 1,600,000/x…

Q: Assess the cost of sales part.  Provide negative and positive observation.

A: The solution is per your requirement. Cost of sales is the costs which are directly related to…

Q: The decrease in gross profit due to decrease in selling price must be:

A: Gross profit is residual income for an entity after deduction of all expenses that are directly…

Q: The decrease in gross profit due to decrease in selling price must be

A: Gross profit is the residual income available after deduction of costs that are directly incurred to…

Q: What is an upstream sale of inventory?

A: The upstream sale of inventory is an inter-company transaction between the parent company and the…

Knowledge Booster
Accounting
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Recommended textbooks for you
  • Intermediate Accounting: Reporting And Analysis
    Accounting
    ISBN:9781337788281
    Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
    Publisher:Cengage Learning
    Cornerstones of Cost Management (Cornerstones Ser...
    Accounting
    ISBN:9781305970663
    Author:Don R. Hansen, Maryanne M. Mowen
    Publisher:Cengage Learning
    Managerial Accounting: The Cornerstone of Busines...
    Accounting
    ISBN:9781337115773
    Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
    Publisher:Cengage Learning
  • Financial Accounting
    Accounting
    ISBN:9781337272124
    Author:Carl Warren, James M. Reeve, Jonathan Duchac
    Publisher:Cengage Learning
    Financial And Managerial Accounting
    Accounting
    ISBN:9781337902663
    Author:WARREN, Carl S.
    Publisher:Cengage Learning,
    College Accounting, Chapters 1-27
    Accounting
    ISBN:9781337794756
    Author:HEINTZ, James A.
    Publisher:Cengage Learning,
  • Intermediate Accounting: Reporting And Analysis
    Accounting
    ISBN:9781337788281
    Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
    Publisher:Cengage Learning
    Cornerstones of Cost Management (Cornerstones Ser...
    Accounting
    ISBN:9781305970663
    Author:Don R. Hansen, Maryanne M. Mowen
    Publisher:Cengage Learning
    Managerial Accounting: The Cornerstone of Busines...
    Accounting
    ISBN:9781337115773
    Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
    Publisher:Cengage Learning
    Financial Accounting
    Accounting
    ISBN:9781337272124
    Author:Carl Warren, James M. Reeve, Jonathan Duchac
    Publisher:Cengage Learning
    Financial And Managerial Accounting
    Accounting
    ISBN:9781337902663
    Author:WARREN, Carl S.
    Publisher:Cengage Learning,
    College Accounting, Chapters 1-27
    Accounting
    ISBN:9781337794756
    Author:HEINTZ, James A.
    Publisher:Cengage Learning,