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respond to: When analyzing Ford Motor Company's latest Form 1 0 - K , we come across comprehensive information regarding its inventory management practices. According
respond to: When analyzing Ford Motor Company's latest Form K we come across comprehensive information regarding its inventory management practices. According to the latest financial report, Ford's total inventories for the fiscal year amounted to $ billion, slightly lower than the $ billion recorded in Ford Motor Company, Inventory for a manufacturing company such as Ford usually consists of raw materials, workinprogress WIP and finished goods. The inventory breakdown for Ford is as follows: raw materials amount to $ billion, work in progress is valued at $ billion, and finished goods have a total worth of $ billion.
Ford employs the FIFO FirstIn FirstOut method for inventory costing, just as an accountant would. This approach is utilized for all types of inventory, including raw materials, work in progress, and finished goods. It guarantees that the costs of the inventory items acquired earliest are utilized first in the calculation of the cost of goods sold Ford Motor Company, The company has stated that there have been no alterations to its costing methods for the periods covered by the financial statements.
The disclosure provided by Ford is in line with the authoritative guidance outlined in the Financial Accounting Standards Board FASB Accounting Standards Codification ASC Topic This requires detailed reporting on inventory valuation methods and any changes made Revsine et al Companies must disclose inventory accounting policies and any notable changes in these policies to maintain transparency, comparability, and reliability in financial reporting, as per ASC Ford's disclosure fulfills these requirements well, providing a transparent and thorough understanding of its inventory practices.
The FIFO method is typically a good fit for companies that face inflation in material costs, such as Ford. Using the FIFO method allows for a more precise representation of current market conditions and prevents outdated costs from affecting the cost of goods sold Revsine et al Therefore, Ford's decision to use FIFO seems suitable considering its manufacturing context and economic environment.
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