Running head: ANALYSIS

Inventory Analysis
Name
Institution Affiliation

ANALYSIS

Part one
Question 1
FIFO
Under this method, the 60 units comprise of the opening stock of 10 rings @1000, the first batch
of 4 rings @ 1000, second batch of 6 @ 1100,third batch of 8 @ 1100, fourth batch of 8 @
1150 ,fifth batch of 6 @ 1175 , sixth batch of 10 @ 1200 and 8 @ 1175 from the last batch
Hence, the inventory used is the first 60= (10+4+6+8+8+6+10+8)
The remaining rings make the closing stock
Closing inventory is:
(1X1175)+ (7X1150) = $9225
LIFO
Under this method, the 60 units comprised of all the units purchased within the year and 2 units
from the opening stock.
Using LIFO the inventory sold is the last 60= (7+9+10+6+8+8+6+4+2)
The closing stock value = 8 x1000
=$8000
Average cost method
Its given by Average price per unit x closing stock

ANALYSIS

Average price per unit= (Total value of stocks/no of units of stocks)

= $66275/68
=$1121.69
Closing inventory value= 8x 1121.69
=$8973.53
Question 2
The method of inventory valuation affects the closing stock hence affects the current assets on
the balance sheet. The three methods have same results except in cases of inflation which causes
change in prices. For instance, when prices are falling, FIFO will result in lower current assets
while LIFO will result in higher current assets, and vice versa.
Question 3
Choice of a companys accounting inventory method depends on various factors. First is the
characteristic of the company products. For example a company producing perishable products
with short shelf life would choose FIFO over LIFO to counter perish ability. The intention of a
company also determines its choice of inventory method. For instance, a company may prefer
FIFO over LIFO in order to match current sales with older cost on the books

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Part 2
Companies selected: Toyota Motor Corp and Honda Motor Co Limited
Question 1
The two companies operate in the auto industry. Toyota Motor Corp is ranked first in the industry
and has led the charts of being the best supplier for a number of years. Honda, on the other hand,
is ranked second. Toyota manufactures different types of motor vehicles while Honda
manufactures both motor vehicles and motor cycles. The market for the companies is global and
widely distributed (Hoovers).
Question 2
Toyota industries have a commitment to corporate governance of maintaining society trust by
fulfilling its social responsibilities. The main key features of this commitment are fairness,
efficiency and transparency of its corporate activities. Honda, on the hand, strives to enhance
corporate governance by appropriately disclosing corporate information to strengthen investors,
customers and shareholders trust. Its key main feature is transparency in management.
Question 3
The top competitors for Toyota Motor Corp are Ford Motor Company, General Motors
Company, Honda Motor Company Limited and Volkswagen. Toyota is highly regarded in the
automotive industry and competes favorably.
The competitors for Honda include Suzuki Motor Corporation, Nissan Motor Co. Limited and
Toyota Motor Corporation. Honda Motor Company has higher sales compared to its competitors,
seconding Toyota Motor Corp (Honda. Corporate Governance,2016).

ANALYSIS

References
Honda. Corporate Governance. (2016). Honda. Retrieved from
http://world.honda.com/sustainability/management/governance/
Hoovers. Toyota Motor Corporation Competion. Hoovers. Retrieved from
www.hoovers.com/company-information/cs/competition.toyota_motor_corporation
Hoovers. (2016). Honda Motors Co. Ltd. Competition. Hoovers. Retrieved from
www.hoovers.com/company-information/cs/competition.honda_motor_co_ltd
Toyota. (n.d). Corporate Governance. Toyota. Retrieved from http://www.toyotaindustries.com/corporateinfo/governance/