How to determine inventory cost, Accounting Basics

Q. How to determine inventory cost?

To place the proper evaluation on inventory a business must answer the question: Which costs must be included in inventory cost? After that when the business purchases identical goods at different costs it must answer the question: Which cost must be assigned to the items sold? In this section you study how accountants answer these questions.

The costs incorporated in inventory depend on two variables such as quantity and price. To turn up at a current inventory figure companies should begin with an accurate physical count of inventory items. They multiply the quantity of inventory with the unit cost to compute the cost of ending inventory. This section discusses the taking of a physical inventory and the methods of costing the physical inventory under both periodic and perpetual inventory procedures. The remainder of the section discusses departures from the cost basis of inventory measurement.

As briefly described in section to take a physical inventory a company have to weigh, count, measure or estimate the physical quantities of the goods on hand. For illustration a clothing store may count its suits a hardware store may weigh washers, bolts and nails and a gasoline company may measure gasoline in storage tanks and a lumberyard may estimate quantities of coal, lumber or other bulky materials. During the taking of a physical inventory the goal should be accuracy.

Posted Date: 7/6/2013 3:57:27 AM | Location : United States

Related Discussions:- How to determine inventory cost, Assignment Help, Ask Question on How to determine inventory cost, Get Answer, Expert's Help, How to determine inventory cost Discussions

Write discussion on How to determine inventory cost
Your posts are moderated
Related Questions
Company A has only been in existence for two full years as a public company. Prior to this, it was a segment of large multinational and was spun off as stand-alone, public company.

Q. Describe Exceptions to the realization principle? Exceptions to the realization principle: The following illustrations are instances when practical considerations may cause

The capital structure of Wild West Inc. is as follows: -    Debts: $5,000,000 (face value) bonds with coupon rate at 8.00% and present price at par -    Preferred shares: $2,000

Q. What is Purchase Discounts account? The buyer records the purchase discount merely when the invoice is paid within the discount period and the discount is taken. The Purchas

Weekly tasks or assignments (Individual or Group Projects) will be due by Monday and late submissions will be assigned a late penalty in accordance with the late penalty policy fou

Oligopoly is a market where the supply is controlled by a little group of companies. In this condition, the actions of single company will have a material effect on the entire mark

1.   Under the FIFO Cost Flow Assumption during a period of inflation, which of the following is false? WHICH OF THE FOLLOWING IS NOT TRUE a.   Income tax expenses will be hig

Determine about the revenue section Revenue section provides a figure for net sales, which is balance of the Sales account, less the balances of contra sales accounts. (Sales -

Fund flow deals with transaction within financial year (One year) while Cash flow Statement record only the cash transaction.