If the company had purchased all its materials from the online marketplace, describe what inventory cost would be shown for all materials on hand based on the average transaction price.Explain if the inventory cost value is higher or lower than the value of all materials if using their standard price.If the company can freely choose the lower of the standard price or the average price in the online marketplace, explain what the lowest possible inventory cost of all materials on hand is.Identify whether there is a particular marketplace vendor who always sells at a price lower than the standard price cost of all materials on hand.

Inventory Cost based on Average Transaction PriceIf the company purchased all materials from the…

Answered: If the company had purchased all its…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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If the company had purchased all its materials from the online marketplace, describe what inventory cost would be shown for all materials on hand based on the average transaction price.
Explain if the inventory cost value is higher or lower than the value of all materials if using their standard price.
If the company can freely choose the lower of the standard price or the average price in the online marketplace, explain what the lowest possible inventory cost of all materials on hand is.
Identify whether there is a particular marketplace vendor who always sells at a price lower than the standard price cost of all materials on hand.

Definition Definition System of assigning an estimated cost to the product (instead of the actual cost) so that the product cost can be determined well in advance and the pricing of the product can be done on time. Since the actual cost cannot be predicted at the initial stage of the production process, the estimated cost is recorded in the books. Any deviation of the estimated cost of the actual cost is adjusted in the books at the end of the period.

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