ORIE_3150_Homework__4_answers

ORIE_3150_Homework__4_answers - ORIE 3150 Homework#4 Spring...

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ORIE 3150 Homework #4 Spring 2009 1. The Collins Company has five inventory items on hand. Collins has found that the items would need to be refurbished before they could be sold, and replacement costs of each of these items has changed. Collins needs to adjust the inventory cost of the items. Find the new cost for each item, and provide the journal entry needed to make the adjustment in their financial records. Item Number on hand Cost per unit Replacement Cost per unit Selling Price per unit Normal Profit per unit Refurbishing Costs per unit Foonbit 4 $50 $55 $100 $20 15 Grapple 8 100 90 120 24 20 Hook 14 80 70 85 17 20 Ibinger 8 90 37 100 20 24 Jackzoom 10 95 92 110 22 24 Answer: Recall the definitions: Net realizable value (NRV) – equals the estimated selling price in the ordinary course of business less costs of repair, preparation and disposal Net adjusted cost (NAC) – equals the NRV less a normal profit margin (NPM). NAC = NRV – NPM Replacement cost (RC) – replacement of inventory by purchase or reproduction. We find the market value using the middle value of the three (NRV, NAC, RC).
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This note was uploaded on 04/19/2009 for the course ORIE 315 taught by Professor Callister during the Spring '08 term at Cornell.

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ORIE_3150_Homework__4_answers - ORIE 3150 Homework#4 Spring...

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