Question
Jonathan Brandis Company is a food wholesaler that supplies independent grocery stores in the region. The company has a perpetual inventory system for all of
Jonathan Brandis Company is a food wholesaler that supplies independent grocery stores in the region. The company has a perpetual inventory system for all of its food products. The FIFO method of inventory valuation is used to determine the cost of the inventory at the end of each month.
Transactions and other related information regarding two of the items (instant coffee and sugar) carried by Brandis are given below for October 2008, the last month of Brandis's fiscal year.
Brandis's sales terms are 1/10, net/30, f.o.b. shipping point. Brandis records all purchases net of purchase discounts and takes all purchase discounts. The most recent quoted price for coffee is $60 per case and for sugar $6.10 per baler, before freight and purchase discounts.
Instructions
(a) Calculate the number of units in inventory and the FIFO unit cost for instant coffee and sugar as of October 31, 2008.
(b) Brandis Company applies the lower-of-cost-or-market rule in valuing its year-end inventory. Calculate the total dollar amount of the inventory for instant coffee and sugar applying the lower-of-cost-or-market rule on an individual-product basis.
(c) Could Brandis Company apply the lower-of-cost-or-market rule to groups of products or the inventory as a whole rather than on an individual-product basis? Explain youranswer.
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