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
what is Accounts payable process?

Is there nay depreciation needed to perform when the revaluation model is applied to the asset?

GDYJ-503 is developed according to the national standard GB-86 Insulating Oil Dielectric Strength Testing Method .The tester can test three cups of oil at the similar time. LCD scr

How do you do journal entries for an item bought on credit and then later returned and the total selling price was 4,275.

User accounts are the primary means of access for actual people to the system (computer), and these accounts insulate the user and the environment, preventing the users from damagi

Could the choice of recording a capital asset impairment or not, impact the financial statements significantly? Explain.

Two friends, Joe and Bill, both have carpentry skills and decide to go into business as partners together ?tting kitchen cabinets. Joe's uncle has agreed to provide £20,000 of capi

What is ACOUNTS RECEIVABLE LEDGER Businesses have several customers and individual businesses aren't assigned an account number they are just in alphabetical order. Accounts

1. Double declining method 2. Units of production method 3. Sum of year digit method 4. Straight-line method Depreciation Fund Method Insurance Method Annualy Method

Q. What is Sales Discounts account? The Sales Discounts account is the contra revenue account to the Sales account. In the income statement the seller deducts this contra reven