![]() Inventory is measured at the standard cost of each unit reflecting predetermined rates for the material, labor and overhead expenses at normal level of output and efficiency. What are costing techniques? Costing technique Therefore, the items remaining in inventory at the end of the period are made up of many periods of purchased or produced inventory (inventory layers). ![]() The LIFO formula assumes that items of inventory that were purchased or produced last are sold first. Under the weighted-average cost formula, the cost of each item is determined from the weighted average of the cost of similar items at the beginning of a period and the cost of similar items purchased or produced during the period. Therefore, the items remaining in inventory at the end of the period are those most recently purchased or produced. The FIFO formula assumes that items of inventory that were purchased or produced first are sold first. Techniques for measuring the cost of inventories, such as the standard cost method or the retail method, may be used for convenience if the results approximate cost. Conversely, when there are many interchangeable items, cost formulas – first-in, first-out (FIFO) or weighted-average cost – may be used. ![]() If items of inventory are not interchangeable or comprise goods or services for specific projects, then cost is determined on an individual item basis. Cost includes not only the purchase cost but also the conversion and other costs to bring the inventory to its present location and condition. Inventories are generally measured at the lower of cost and net realizable value (NRV) 3. raw materials, packaging).Ĭommercial samples, returnable packaging or equipment spare parts typically do not meet the definition of inventories, although these might be managed using the inventory system for practical reasons. in the form of materials or supplies to be consumed in the production process or rendering of services (e.g.in the process of production for such sale (i.e.finished goods, merchandise purchased for resale) held for sale in the ordinary course of business (e.g.
0 Comments
Leave a Reply.AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |