...Darren Fedon - DLF0011 Case 04-4 Three Little Pigs, Inc. Background Three Little Pigs, Inc. (PIGS) is a provider of pork products to the food service industry and institutional markets in the U.S. PIGS develops and produces the majority of their hogs for internal processing (processed pork products) and while selling a portion for outside third parties (live hogs). During PIGS fiscal year 2003, an external factor has increased the supply of hogs on the market which in turn is pushing down futures prices. Management believes that this decline hog prices warrants reviewing their inventory because there may be a lower of cost or market issue. The basis for this assumption is the decline in futures prices in both the second and third quarters. However, the CEO believes that the price fluctuations are due to seasonality and thus temporary in nature, referencing the price recovery in the fourth quarter of the futures market and therefore impairment isn’t necessary. Issue PIGS management has concerns about how to evaluate their pig inventory for impairment. Two issues were raised related to inventory evaluation and reporting of the impairment (if applicable). The two issues are as follows: 1) The options for inventory evaluation presented to them are as follows a) total inventory basis, b) inventory category, c) end product category or d) individual basis. 2) Once a correct method has been selected; management will need to determine if impairment is needed,...
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...BACKGROUND Three Little Pigs, Inc. (PIGS) is a provider of pork products. The Company produces approximately 4.1 million hogs per year; the majority of which are internally processed. However, a portion of the hogs produced are sold to outside third parties. PIGS does not have any commitments to sell live hogs to third parties and it does not hedge its live hogs through commodity futures contracts. PIGS has three major categories of hog inventory: (1) live hogs available for sale; (2) developing animals; and (3) processed pork products. Management is confident that the wholesale price of processed pork products exceeds the cost to bring such products to market. However, spot market prices charged for live hogs sold to third parties have recently declined and are currently below the Company’s cost of producing these hogs. The decline in spot market prices is due to several factors, including the capture of the Big Bad Wolf, which led to an increased supply of pork. As of the second quarter ending September 2002, futures prices for lean hogs indicate a further decline before recovering late in the fourth quarter, as illustrated below: October 2002 $29.00 November 2002 $30.00 December 2002 $33.00 January 2003 $37.00 February 2003 $42.00 March 2003 $45.00 Farmer Joe asserts that the price decline reflected above is the result of seasonality. Currently, the cost of producing a live hog is $38/cwt ($38 per 100 pounds). Therefore, live hogs available for sale are carried...
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...When evaluating inventory impairment for the PIGS entity, it depends specifically on the character and composition of the inventory. The method used should clearly reflect the income of that period by applying the rule of lower of cost of market to each item or on a total inventory basis. If the company evaluates impairment by product line, there must be more than one major product that exists. This company does have more than one product line that exists consisting of: live hogs for sale, developing animals, and processed pork products. They seem to apply the accounting ideas of raw materials, work-in-process, and finished goods. The live hogs for sale and developing animals are stated to be processed and sold as the finished goods of processed pork products. Even though the most generally used method of lower of cost or market is to be applied separately to each item in the inventory, there is evidently only one-end product category of the total stock. Significantly, the only end-product of the inventory is processed pork products which apply the total inventory basis. There was a reduction in cost prices for certain inventory of live hogs and developing animals, but there was no loss in income since they expected to recover the cost of the inventory due to substantial evidence within the company. This specifically means that the company should apply the method on a total inventory basis because this specific inventory will enter the same category of finished product in a balanced...
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... |Definition of decision variables: | | | |X1= No. of fresh hams produced | | | |X2= No. of smoked hams produced on regular time | | |X3= No. of smoked hams produced on overtime | | |X4= No. of fresh pork bellies produced | | | |X5= No. of smoked pork bellies produced on regular time | | |X6= No. of smoked pork bellies produced on overtime | | |X7= No. of fresh picnics hams produced | | | |X8= No. of smoked picnics hams produced on regular time | | |X9= No. of smoked picnics hams produced on overtime | | | | ...
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...Case 04-4 Three Little Pigs, Inc. Research Response Three Little Pigs, Inc. (PIGS) is a provider of live hogs and pork products. They classify inventory into three distinct categories: live hogs ready for sale, developing animals, and processed pork products. They have always evaluated inventory at cost because the wholesale price has always exceeded the cost of bringing the products to the market. Now, due to several factors, PIGS believes that they may have a lower of cost or market issue related to valuing some of the hogs. 1) Does PIGS need to write-down inventory? 2) What approach should be used for the write-down (by category, total, end category, etc.)? Does PIGS need to write-down inventory? PIGS has evidence that predicted futures prices for the months of October 2002 – January 2003 will fall below the cost of production for a hog. Where there is evidence that the utility of goods will be less than cost the difference is recognized in the current period (ASC 330-10-35-1). A write-down is generally required unless the decline is due to seasonal price fluctuations (ASC 330-10-55-2). Though, Farmer Joe believes this is just a seasonal fluctuation, there is not enough evidence in the case to support that claim. There are no examples of this happening in prior years. The one reason that is given for the price decrease is the capture of the Big Bad Wolf, which led to an increase in the supply of pork. This appears to be an unusual event that would not happen...
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...Three Little Pigs Case I. INTRODUCTION Three Little Pigs, Inc.(PIGS) provides pork products, and sells a quantity of hogs produced to a number of wholesalers, retailers, and third parties across the United States. PIGS has three inventory departments which consist of live hogs ready for sale, developing animals, and processed pork items. Management has concerns about how to evaluate their different levels of inventory, and how they should account for impairment. The issue of impairment relates only to the live hogs and developing animals sold to third parties because management believes the internal pork products will be able to satisfy the cost of live hogs and animals processed internally. II. How should the company determine whether an inventory impairment exists i. Should inventory be evaluated for impairment under the lower of cost or market method on a total inventory basis? According to the FASB Accounting Standards Codification ASC 330-10-35-8 (inventory) " Depending on the character and composition of the inventory, the rule of lower of cost or market may properly be applied either directly to each item or to the total of the inventory (or in some cases, the total of the components of each category). The method shall be that which most clearly reflects periodic income." When a firm chooses to value its inventories based on the profitability of one inventory division it makes the assumption that all of the inventory divisions are...
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...Titan Union Accountants Titan Union Accountants Memorandum To: Farmer Joe, CEO, Three Little Pigs, Inc. (PIGS) From: Accounting Consultant Subject: Assessment of Impairment Date: January 1, 2003 I. Facts During this fiscal year, with the capture of the Big Bad Wolf, there is an increase of supply of pork and the market price of pork is on the decline. Although the market price for hogs is forecasted to stabilize within the year, Three Little Pigs, Inc. (PIGS) is dealt with the dilemma of whether they should impair their inventory of hogs, effective September 30, 2002. With three categories of hog inventory (live hogs for sale, developing animals, and processed pork products), PIGS is only considering to impair their inventories of live hogs and developing animals to be sold to third parties at market prices. Concerning processed pork prices, they are believed to be sufficient to cover production costs. II. Issues Management refuses to write off their inventory as they believe future stabilized prices will cover the losses from the previous quarters. However, specific scenarios must be evaluated to decide what the best solution is for PIGS to efficiently report their inventory. The issue is whether impairment should exist at September 30, 2002. If impairment shall exist, the question remains whether the impairment would be evaluated under the lower cost or market method on a total inventory basis, category basis, end product basis, or on an individual...
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...priceless lessons such as trying new foods can be challenging for many parents. As a God Mother of a very finicky three year old boy, it is implausible to get him to try new meals or snacks. Even after I sought guidance from his mother and mine for ideas, he still refused different refreshments, until I read to him and his kid sister Green Eggs and Ham and several others by Dr. Seuss. It happened by mistake when I realized that many of Dr. Seuss books teach children helpful lessons that most parents are feeble to because he uses fun graphics, rhyme, and entertains their imagination. When you actually analyze these books written by Dr. Seuss, it is not hard to see the main ideas of his stories through the pictures alone. Before I even open the book of Green Eggs and Ham, I see similarities of Amauri and the main character, The Black Hatter. They are wide eyed, with their nose up, and careful not to get too close to anything out of the normal, but yet curious enough to examine the beasty looking cuisine. On page twenty-three, there is a picture of Sam-I-Am enticing “The Black Hatter” into a box with a fox to try the green eggs and ham. This is an ironic metaphor of how parents try to get their children to eat their veggies. “I will let you watch TV with Daddy during dinner if you eat your green beans”. However, the bribe is not enough to get them interested. As I read this story to Amauir and his sister, I saw his expression felt the same as the poor Black Hatter. Rhyming is another...
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...Popular Culture and its Effect on Society Chris Lupkes SOC/105 Michelle Gardner March 04, 2013 The name Theodore Geisel, though one of the most famous contemporary writers, is rarely recognized even though his work is well known throughout the world. He has won three Academy Awards and a Pulitzer Prize for his work but people only recognize him by his pseudonym, Dr. Seuss. The Cat in the Hat is a book is about a Cat that moves in on two unsuspecting Children on a rainy day. He creates a whirlwind of misbehavior that the kids are at first powerless to stop. After the cat invites his friends into the house, they trash the place and try to get the kids to join in with all the mischief. After the boy asserts himself and orders the fun-loving cat to hit the road; that is where the story ends. This book was Theodor’s third book, the first of the six that the Cat appears in. The Cat in the Hat was perhaps the defining book of his career. The book only has 236 “new-reader” words in its vocabulary. When Ted’s first wife died in 1967, he married his old friend which only influenced the production of his later books. Theodore wrote the book because he felt that there should be more entertaining and fun material...
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...Conformity and Control, The Story of Green Eggs and Jam By: TheSarcasmLord After watching Green Eggs and Jam, many people laugh at the silly video and take it for nothing more than meaningless entertainment, but in fact it has some deep meaning. Green Eggs and Jam by Jason Gastrow is a parody and perspective shift of the classic book Green Eggs and Ham by Dr. Seuss, and can be viewed here on youtube. In Green Eggs and Jam, Gastrow takes the original concept of Green Eggs and Ham and follows the idea that in actuality Sam is fairly pushy for trying to force his opinion onto others. This aspect is not touched on in the original book, and it brings up the important point that if someone’s opinion is contrary to another person’s it should be...
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...MailOnline - Sports website of the year Home U.K. U.S. News Sport TV&Showbiz Femail Health Science Money Video Coffee Break Travel Fashion Finder Football Transfer News Cricket F1 Boxing Tennis Rugby Union Rugby League Golf Racing More Sports Fantasy Football Headlines Login DailyMail Tuesday, Aug 12th 2014 4PM 12°C 7PM 11°C 5-Day Forecast SuperBale! Bulked-up Real Madrid star eyes more glory ahead of his homecoming at Cardiff, the city where it all began 25 years ago LONDON, ENGLAND - JANUARY 19: Samuel Eto'o of Chelsea celebrates after scoring his team's third goal and completing his hat trick during the Barclays Premier League match between Chelsea and Manchester United at Stamford Bridge on January 19, 2014 in London, England. (Photo by Mike Hewitt/Getty Images)Liverpool consider shock swoop for former Chelsea star Eto'o as Rodgers looks to bolster striking options REVEALED: Find out who is the Premier League's most popular player when it comes down to shirt sales Man United BAN supporters from bringing in iPads and tablets into Old Trafford ahead of the new season FA facing new Wembley low with just 10,000 tickets sold for Norway friendly Khedira is NOT for sale: Ancelotti insists midfielder is going nowhere as Arsenal and Co are dealt transfer blow Drogba could miss the start of the season after picking up ankle injury Football - Tottenham Hotspur v FC Schalke 04 - Pre Season Friendly - White Hart Lane - 14/15 - 9/8/14 Tottenham Hotspur...
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