Question
Question No: 5 10 Marks Arwa L.L.C. is a company engaging in both retailing and manufacturing of hand bags, beauty products. The companys retail show
Question No: 5 10 Marks Arwa L.L.C. is a company engaging in both retailing and manufacturing of hand bags, beauty products. The companys retail show room is located in Ruwi street,, Muscat The managing director of the company wants a clarified information from the companys accountant about the following cases: Case (a) The main product line in the company are beauty products and cosmetics such as: lipsticks, moisturizers and make-up kits. Naturally, the product lines are heavily demanded by women customers. Each product looks similar but has differences in color, flavor and nature. The company sells hundreds of different brands of these products. Each product is purchased at similar price and looks similar. The products life cycle is very short and new products are introduced frequently. The inventory maintenance by the company was not properly carrying out. From the words of sales manager, the cost of each product could not sure to calculate. But he informed the management that he is confident about the selling price and informed reliably that each product line makes out a gross margin of 50%. Case (b) Arwa L.L.C. is also manufacturing and selling hand bags. The company manufactures their own handbags with beautiful craftsmanship. The company is manufacturing around 50,000 handbags in a year which occupies 20 percent of the space and overheads in a factory. There are 20 people are employed in this hand bags division. Required: i. On the role of an accountant, deal with the above cases and provide your information about the methods of cost maintenance of inventories. ii. Also explain about the methods of inventory maintenance applicable to the above cases. (Case a: 5 Marks, Case b: 5 Marks)
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