Your client, Ridgewood Heating and Cooling, specializes in residential air conditioning and heating installations. The company maintains an inventory of air conditioning units, furnaces, and air handling ductwork. The client has provided the following selected financial statement information for the year ending December 31, 2011:

Following is a breakdown of the ending inventory account as of December 31, 2011:

Ridgewood stores inventory in a 100,000 square foot warehouse facility at a location different from its corporate office. A single AC unit is stored on a 4 foot by 4 foot pallet. Warehouse storage shelves allow the company to store 1 pallet on the floor while 2 additional pallets are placed on shelves above the first pallet. Furnaces are also stored on similar sized pallets. Due to the height of the furnaces, only one unit can be stored on a shelf above another pallet that rests on the floor. Air handling ducts are stored in boxes that are 5 foot by 5 foot at the base and 7 feet tall. Three boxes can be stacked on top of the box that sits on the floor.

Required
a. Design analytical procedures to evaluate the reasonableness of the ending inventory account.
b. What concerns, if any, do you have about the ending inventory at Ridgewood Heating andCooling?

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2/31/201 12/31/2010 12/31/2009 Total Sales Cost of Goods Sold Ending Inventory $55,443,900 47,771,880 9,582,960 $52,700,440 46,810,900 8,100,220 $50,384,300 44,670,400 7,730,660 Inventory Description Quantity Ending Balance AC Unit Model 635 AC Unit Model 770 Furnace Model 223 Furnace Model 225 Air Handling Ducts Total 1,240 Units 1,733 Units 1,992 Furnaces 2,008 Furnaces S 806,000 1,940,960 2,589,600 2,761,000 1,485,400 11,883 Boxes $9,582,960