Inventory Valuation Analysis at a Local Chevrolet Dealership

How should each inventory item at the Chevrolet dealership be reported, based on the data provided?

Would each item be reported at cost or net realizable value (NRV)?

Answer:

Each type of vehicle's inventory cost should be reported at the lower of cost or net realizable value, and then multiplied by the quantity of vehicles in stock to determine the total cost of that inventory.

This analysis requires us to calculate whether each inventory item should be reported at its cost or Net Realizable Value and then determine the total cost for each type of vehicle based on the quantity and the unit cost or NRV, whichever is lower.

For vans, trucks, and SUVs, the NRV is used for reporting, while for 2-door sedans, 4-door sedans, and sports cars, the cost is used for reporting.

Let's break it down further:

  • Vans: NRV per unit = $19,500, Total = $39,000
  • Trucks: NRV per unit = $15,900, Total = $79,500
  • 2-door sedans: Cost per unit = $11,900, Total = $11,900
  • 4-door sedans: Cost per unit = $15,900, Total = $95,400
  • Sports cars: Cost per unit = $31,500, Total = $63,000
  • SUVs: NRV per unit = $22,500, Total = $157,500
← Analysis of electronic toys companies Time value of money and risk return tradeoff in finance →

More Posts: