Lesson: Relative Sales Value Example

In this lesson, take a deep dive with Nick Palazzolo, CPA, into the intriguing world of inventory costing using the relative sales value method. Nick demonstrates how to allocate total costs to different batches of inventory based on the sales value when actual costs aren't readily apparent. By breaking down a practical example where Banana Inc. purchases and sells three batches of inventory, Nick simplifies the process of cost allocation. He meticulously illustrates how to compute the percentage each batch contributes to total sales, and then applies this percentage to distribute the overall cost and gross profit among the batches, ensuring the nuances of this method are clear and easy to grasp.