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Bashley Ld. is a new luxury retail company located in Kingston. You have been asked to give advice to the Accountant as to the accounting treatment for the following:
a) One of Bashley's product line is a beauty product and hundreds of brands are available. Each product is similar, purchased at similar prices and has a short lifecycle before a new and similar product is introduced. The POS and inventory system is not yet fully functional. The Sales Manager of the cosmetic department is unsure of the cost of each product but is confident of the selling price and has reliably informed you that Bashley makes an average gross margin of 65% on each line.
b) Bashley also manufacture and sells its own line of handbags as they wish to be assured of the quality and craftsmanship that goes into making each handbag. The handbags have been manufactured in the head office factory in the UK for over 50 years. Average annual production is 100,000 handbags and uses 15% of the space and overheads of the head office factory. 10 persons are employed in this division and is seen as being an efficient division within the overall company.
Required:
In accordance with IAS2 Inventories, explain how the above should be measured
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