Peerless Joint Replacements Inventory computation Peerless Joint Replacements tracks direct materials in inventory so they can identify the shipment lot if there were to be a problem with any of their products. At the end of October, the direct material cost of their Hip and Knee Value Stream inventory (Raw Materials, Work-in Process and Finished Goods) was $516,800. During October, there were twenty working days and their Hip and Knee Value Stream had material costs of $609,400 and conversion costs of $848,300. At the end of October, the Hip and Knee Value Stream had raw material on hand equal to eight days of production, work-in-process equal to four days of production, and finished goods equal to five days of production. Create an Excel spreadsheet that computes and reports a value for ending.

Peerless Joint Replacements lean accounting memo Edwin Jackson, President of Peerless Joint Replacements has concerns about adopting lean accounting. “I like the idea of reducing the time and effort spent recording and analyzing detailed inventory records, but we have to report inventory cost on the financial statements. If we don’t track individual product costs, how are we going to satisfy our auditors that our reported inventory values are accurate? In addition, how are we going to know how profitable our products are if we don’t compute the cost of each item in inventory? How are we going to know if we’re pricing our products correctly? And” Assume you are the Controller for Peerless Joint Replacements. Peerless Joint Replacements is organized by value streams and their inventory turns company-wide have improved from 5 per year at the beginning of the lean transformation to 14 per year. You have proposed using the material cost plus days of conversion cost method for valuing ending inventory, and you are have provided an ending inventory calculation for the hip and knee value stream for October as an example (the computational part of the assignment). Prepare a memo to President Jackson addressing his concerns inventory reporting analyzing profitability, and product pricing if individual product costs are not calculated. You should reference your computations as an attachment, or incorporate relevant numbers from your computation into your memo.

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