Inventory Concept and Depreciation Methods Assignment
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Inventory Concept and Depreciation Methods Assignment
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HCA 312 – WEEK 3 ASSIGNMENT
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INVENTORY CONCEPT & DEPRECIATION METHODS
INSTRUCTIONS: You should review Chapter 9 before completing the template. Refer to the Week 3 Assignment directions within the course to understand what is expected in each row of the table below. Detail for
each section is required. If you include enough detail for each section, the template document will be at least eight pages in length, which meets the paper length requirements. Include APA citations within the
Response Column where appropriate. List your references in APA format on the last row of this template. All citations and references must be in APA style according to the Writing Center guidelines. Once you
complete the template, upload the document to the Week 3 Assignment section of the course.
PART I: INVENTORY CONCEPTS AND CALCULATIONS
Answer the following questions.
- In your own words, discuss the inventory concept.
- List an example of a hospital inventory item. Describe how this item moves from inventory to COGS (Cost of Goods Sold).
- INVENTORY CALCULATION STORY PROBLEM:
ABC Pharmacy began the year with 300 units of Product A in inventory with a unit cost of $40. The following additional purchases of the product were made:
- April 1, 200 units @ $50 each
- July 1, 300 units @ $55 each
- Sept.15, 350 units @ $60 each
- Nov. 20, 200 units @ $65 each
At end of year, ABC Pharmacy had 400 units of its product unsold. Your task is to calculate cost of ending inventory as well as cost of goods sold by (a) FIFO, (b) LIFO, and (c) Weighted-Average.
Use the information in the table below to assist you in calculating the three different inventory methods shown under Inventory Methods.
Month Units Cost per Unit Amount January 1 Begin Inventory 300 40 $12,000 April 1 200 50 $10,000 July 1 300 55 $16,500 September 15 350 60 $21,000 November 20 200 65 $13,000 Totals 1350 $72,500 Make sure to show your work below for FIFO, LIFO, and Weighted-Average.
INVENTORY METHODS
Complete the FIFO calculations in the table: 400 Units in left in Inventory.
Complete the LIFO calculations in the table: 400 Units in left in Inventory.
Complete the Weighted-Average calculations in the table: 400 Units in left in Inventory.
Weighted -Average $72,500 1350 $54 Average Cost per Unit PART 2: DEFINE THE FIVE (5) METHODS FOR COMPUTING BOOK DEPRECIATION.
As the Practice Manager, you are tasked with explaining the depreciation methods to Dr. Smith and Dr. Brown. Write an explanation of each method in your own words.
- Straight Line Depreciation: Include what is meant by salvage value.
- Accelerated Book Depreciation: Sum of Years’ Digits Method.
- Accelerated Book Depreciation: Double Declining Balance Method
- Accelerated Book Depreciation: 150% Declining Balance Method.
PART 3: CALCULATING DEPRECIATION
As the manager of Dr. Smith and Dr. Brown’s practice, you need to decide whether to purchase new equipment. Use the following information for the depreciation method calculations. You must show your work in the blank cells provided.
- Example of Straight-Line Depreciation Method
Use the following information to calculate the Straight Line
- Fixed asset cost: $20,000
- Useful life: five years
- Residual value: $2,000
Table for question 1, fill in the blanks for rows 4, 5, 6, 7, and 8.
Depreciation Method Calculation Cost Residual Value Useful Life Depreciation Amount Straight-Line Cost – Residual Value/Useful Life $20,000 $2,000 5 $3,600 End of Year Cost of Equipment Yearly Depreciation Expense Accumulated Depreciation, End of Year Book Value, End of Year (Cost Accumulation Depreciation)
Ending Residual Value
- Example of Accelerated Book Depreciation: SYD (Sum of Years’ Digits) Method
Use the following information to calculate the SYD:
- Fixed asset cost: $20,000
- Useful life: five years
- Residual value: $2,000
Table for question 2. Fill in the blanks in rows 4, 5, 6, 7, and 8.
Depreciation Method Cost Residual Value Useful Life Sum of Year’s Digits $20,000 $2,000 $18,000 5 End of Year (Cost Minus Residual) Fraction for Year = Yearly Depreciation Expenses Accumulation Depreciation End of Year Book Value, End of Year (Cost Accumulation Depreciation) 1 2 3 4 5 Ending Residual Value
- Example of Accelerated Book Depreciation: DDB (Double Declining Balance) Method
- Fixed asset cost: $72,340
- Useful life: five years
- Salvage value: $10,000
Table with data for question 3 part 1
Depreciation Method Calculation: Cost to be Depreciated Salvage Value Useful Life Straight-Line Factor Double Declining Factor DDB Cost Residual Value/Useful Life 72, 340 10,000 5 0.2 0.4 Table for question 3 part 2. Fill in the blanks for columns 2, 4, 5 and 6.
Years of Useful Life Initial cost and then the Carry Forward Book Value Double-Declining Factor Annual Depreciation Expense Accumulated Depreciation (Reserve for Depreciation) Net Remaining Underpreciated (Net Book Value) 1 $72,340 0.4 $ $ $ 2 0.4 $ $ $ 3 0.4 $ $ $ *4 0.2 $ $ $ *5 0.2 $ $ $ Salvage Value *DDB is used for the first three years, then the SL method is used for the last two years. Therefore, the Double-Declining factor is shown for 3 years and the Straight-Line factor is shown for year 4 and 5.
PART 4: ANALYSIS OF DEPRECIATION METHODS
No matter which type of health care organization, as a manager, you need to be able to choose the best depreciation method for that type of organization based on the fixed asset being purchased. With that said, complete the following:
- Choose one of the depreciation methods that you feel would be more feasible for a hospital to use. Explain your rationale.
- Choose one of the depreciation methods that you feel would be more feasible for a physician practice to use. Explain your rationale.
- Explain why it is important for a health care organization or a physician practice to use a depreciation method.
PART 5: RECOMMENDATION
- What depreciation method do you recommend Dr. Smith and Dr. Brown use to purchase a fixed asset? Explain the rationale for your choice.
REFERENCES
List your References in APA Format as outlined in the assignment directions.
HCA312 9/29/2020
RUBRIC
Excellent Quality
95-100%
Introduction 45-41 points
The background and significance of the problem and a clear statement of the research purpose is provided. The search history is mentioned.
Literature Support
91-84 points
The background and significance of the problem and a clear statement of the research purpose is provided. The search history is mentioned.
Methodology
58-53 points
Content is well-organized with headings for each slide and bulleted lists to group related material as needed. Use of font, color, graphics, effects, etc. to enhance readability and presentation content is excellent. Length requirements of 10 slides/pages or less is met.
Average Score
50-85%
40-38 points
More depth/detail for the background and significance is needed, or the research detail is not clear. No search history information is provided.
83-76 points
Review of relevant theoretical literature is evident, but there is little integration of studies into concepts related to problem. Review is partially focused and organized. Supporting and opposing research are included. Summary of information presented is included. Conclusion may not contain a biblical integration.
52-49 points
Content is somewhat organized, but no structure is apparent. The use of font, color, graphics, effects, etc. is occasionally detracting to the presentation content. Length requirements may not be met.
Poor Quality
0-45%
37-1 points
The background and/or significance are missing. No search history information is provided.
75-1 points
Review of relevant theoretical literature is evident, but there is no integration of studies into concepts related to problem. Review is partially focused and organized. Supporting and opposing research are not included in the summary of information presented. Conclusion does not contain a biblical integration.
48-1 points
There is no clear or logical organizational structure. No logical sequence is apparent. The use of font, color, graphics, effects etc. is often detracting to the presentation content. Length requirements may not be met
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