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

Generally accepted accounting principles (gaap), Generally Accepted Account...

Generally Accepted Accounting Principles (GAAP) are guidelines for companies to follow as tehy prepare and issue financial statements. Let's start by getting an understanding of wh

What is the net cash provided by investing activities, Zoum Corporation had...

Zoum Corporation had the following transactions during 2014: 1. Issued $125,000 of par value common stock for cash. 2. Recorded and paid wages expense of $60,000. 3. Acquired land

Quarterly cash payments budget, Emily Jackson, RSC Designs management accou...

Emily Jackson, RSC Designs management accountant, is in charge of preparing the master budget for 2013.  She has gathered the following information: 1. Annual profit for the 201

Continuous compounding, In Section we had established an association among ...

In Section we had established an association among the effective and nominal rate of interest where compounding arise n times a year that is as given: r = (1 +  k/m ) m - 1

Termination of office of trustee-bankruptcy, TERMINATION OF OFFICE OF TRUST...

TERMINATION OF OFFICE OF TRUSTEE The trustee may vacate office in the following ways: 1. Resignation : He may resign at a meeting of creditors and with their consent. 2.

What should be didde''s 2011 earnings per common share, Didde Co. had 300,0...

Didde Co. had 300,000 shares of common stock issued and outstanding at December 31, 2010. No common stock was issued during 2011. On January 1, 2011, Didde issued 200,000 shares of

Elements of the tort of negligence, Answer both parts of this task. Part (i...

Answer both parts of this task. Part (i) is worth a maximum of 5 marks and Part (ii) is worth a maximum of 10 marks. (i) List the elements of the tort of negligence. (ii) Enr

VAT SYSTEM, RECOMENDATION REGARDING THE CURRENT SOUTH AFRICAN VAT SYSTEM

RECOMENDATION REGARDING THE CURRENT SOUTH AFRICAN VAT SYSTEM

Horizontial and Vertical Analysis, #qUsing these data from the comparative ...

#qUsing these data from the comparative balance sheet of Junior Company, perform horizontal analysis. JUNIOR COMPANY

VAT, EXAMPLES OF HOW VAT SYSTEM WORKS

EXAMPLES OF HOW VAT SYSTEM WORKS

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