Inventory of raw material, Financial Accounting

Assignment Help:

1) Inventory of raw material are held to make sure that the production process is not disrupted because of shortage of raw material. The amount of raw material inventory would based upon the speed at that the raw material can be procured; the greater the speed and lower would be the stage of raw material inventory. Higher the improbability in the supply of raw material, higher would be the level of raw material inventory.

2) Work in process i.e. WIP inventories occur in the process of production. This type of inventories is also considered to as "Process Inventories". Under case of easy products the WIP inventories would be less, while in case of complex products needing various sub-processes and sub-assemblies the work in process inventory would be high.

3) Finished goods inventories are held to meet customer's need promptly. The quantum of finished services or goods inventory would based upon:

  • Time needed to fill an order from the customer. If the products is of that nature which any unexpected demand can be met at short notice the level of inventories would be lower, and
  • Variety of the product line: Firms selling a broad range of products normally need to invest more in finished goods.

4) Inventories are also conduct; hence the order cost is reduced.

5) Spares: An inventory of spare items which are required for the smooth running of business is also kept.

6) Transaction or Precautionary and Speculative Motives: Inventories that are held for conducting normal everyday business are termed as transaction inventory. Precautionary inventories are those inventories that are held to make sure that in case of shortage or adverse price movement, the production process will not be stopped because of the lack of inventory.


Related Discussions:- Inventory of raw material

Financial strategy IRR, what managers should know about internal rate of re...

what managers should know about internal rate of return (IRR) and why?

implied exchange rate between usd and gbp , You have been provided with th...

You have been provided with the following information on a fixed-fixed USD-GBP currency swap, the spot exchange rate between USD and GBP, and the USD and GBP yield curves: Fi

What is the net present value of this machine, A company is considering the...

A company is considering the purchase of new equipment for $45,000. The projected after-tax net income is $3,000 after deducting $15,000 of depreciation. The machine has a useful l

Prepare a journal entry to record the total factory payroll, Time tickets f...

Time tickets for factory employees during the month of August are summarized as follows. Prepare a journal entry to record the total factory payroll, the indirect payroll and the d

What do you mean by issuer, Q. What do you mean by Issuer? Issuer - Thi...

Q. What do you mean by Issuer? Issuer - This term means an issuer, securities of which are registered under Section 12 of Securities Exchange Act of 1934, or that is essential

.which of the following is true, 1.Which of the following is true? A. Land ...

1.Which of the following is true? A. Land is depreciated using the straight line depreciation method B. Land is amortized using the declining balance method C. Land is depleted usi

What is cs optimal decision, Copper Suppliers, Inc. (CS), is a distributor ...

Copper Suppliers, Inc. (CS), is a distributor of commercial grade copper. CS purchases copper directly from copper mines and then after refining it, sells the refined copper to in

Prepare a partial balance sheet, On December 31, 2014, Santana Company has ...

On December 31, 2014, Santana Company has $7,194,600 of short-term debt in the form of notes payable to Golden State Bank due in 2015. On January 28, 2015, Santana enters into a re

Liquidation of companies-bankruptcy and liquidation, LIQUIDATION OF COMPANI...

LIQUIDATION OF COMPANIES (a) Methods of Winding Up: A company may be wound up:By the court, Voluntarily, either as a members' or a creditors' winding up; or Subject to the s

Investment with ex. div. quotation-executorship laws, Investment with ex. d...

Investment with ex. div. quotation Investment with ex. div. quotation will be debited to the investment account at its ex. div. value. The full impending dividend will also

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd