A Particular Production Process Requires Two Types of Raw Materials

Essay

A particular production process requires two types of raw materials to produce the end product. Each unit of finished product requires three units of raw material A and 2 units of raw material B, plus processing costs of $35. The following provides information on inventories at fiscal 2019 year-end:
$\begin{array} { | l | r | r | r | r | } \hline \text { Inventoryitem } & & & \begin{array} { r } \text { Replacement } \\\text { cost }\end{array} & \begin{array} { r } \text { Net realizable } \\\text { value }\end{array} \\\hline \text { Finished goods } & \text { \# units } & \text { Cost per unit } & \text { NA } & 161 \\\hline \text { Raw material A } & 800 & 181 & 17 & \text { NA } \\\hline \text { Raw material B } & 150 & 10 & 53 & \text { NA } \\\hline\end{array}$
Required:
a. Evaluate these inventories to determine the amount of write-down, if any.
b. If the entry required in part (a)is not made in fiscal 2019, what is the effect on
i)2019 and 2020 inventory on the balance sheet
ii)2019 and 2020 cost of goods sold
iii)2019 and 2020 net income
iv)2019 and 2020 retained earnings