Balmoral Ltd commenced business on 1 July 2013.The company manufactures bookcases.Summary data for Balmoral's first full year of operations are: $\begin{array}{|l|l|}
\hline \text { Closing finished goods in units } & 900 \
\hline \text { Closing value of raw materials inventory } & \$ 50000 \
\hline \text { Purchases of raw materials } & \$ 450000 \
\hline \text { Salaries: } &\
\hline \text { Factory } & \$ 150000 \
\hline \text { Marketing } & \$ 90000 \
\hline \text { Administration } & \$ 70000\
\hline \text { Factory depreciation } & \$ 60000 \
\hline \text { Factory equipment depreciation } & \$ 45000 \
\hline \text { Advertising } & \$ 80000 \
\hline \text { Interest } & \$ 39000 \
\hline
\text { Sales price per unit } & \$ 79 \text { per unit } \
\hline \text { Packaging and delivery costs of finished goods } & \$ 9 \text { per unit } \
\hline \text { Normal operating capacity (units) } & 10000 \
\hline \text { Production this period (units) } & 10000\
\hline
\end{array}$ Packaging and delivery are essential to be able to sell the product.What total value should be attributed to finished goods inventory in the financial statements in accordance with IAS 2?

Question

Balmoral Ltd commenced business on 1 July 2013.The company manufactures bookcases.Summary data for Balmoral's first full year of operations are: $\begin{array}{|l|l|}
\hline \text { Closing finished goods in units } & 900 \
\hline \text { Closing value of raw materials inventory } & \$ 50000 \
\hline \text { Purchases of raw materials } & \$ 450000 \
\hline \text { Salaries: } &\
\hline  \text { Factory } & \$ 150000 \
\hline  \text { Marketing } & \$ 90000 \
\hline  \text { Administration } & \$ 70000\
\hline \text { Factory depreciation } & \$ 60000 \
\hline \text { Factory equipment depreciation } & \$ 45000 \
\hline \text { Advertising } & \$ 80000 \
\hline \text { Interest } & \$ 39000 \
\hline
\text { Sales price per unit } & \$ 79 \text { per unit } \
\hline \text { Packaging and delivery costs of finished goods } & \$ 9 \text { per unit } \
\hline \text { Normal operating capacity (units) } & 10000 \
\hline \text { Production this period (units) } & 10000\
\hline
\end{array}$ Packaging and delivery are essential to be able to sell the product.What total value should be attributed to finished goods inventory in the financial statements in accordance with IAS 2?

Quizplus · Accepted Answer

The total value of finished goods inventory is the sum of the cost of raw materials used, direct labor, and factory overhead applied to the units in finished goods inventory. In this case, the cost of raw materials used is $450,000, the direct labor is $150,000, and the factory overhead is $60,000 + $45,000 = $105,000. Therefore, the total value of finished goods inventory is $450,000 + $150,000 + $105,000 = $705,000. However, since the company has 900 units in finished goods inventory, the total value of finished goods inventory is $705,000 * 900 / 10000 = $63,450.

Balmoral Ltd Commenced Business on 1 July 2013 Packaging and Delivery Are Essential to Be Able to Sell