abnormal waste of materials, labour or other costs.Cost of conversion – this includes direct costs and production overheads.Ĭosts which must be excluded from the cost of inventory are:.Cost of purchase – material costs, import duties, freight.Inventory is included in the statement of financial position at:Ĭost includes all the expenditure incurred in bringing the product or service to its present location and condition. finished goods (which have been manufactured by the business).partly-finished goods (usually called work in progress – WIP).raw materials and components (used in the production process).explain the use of continuous and period-end inventory records.explain the IASB requirements for inventories.assess the effect of using either FIFO or AVCO on both profit and asset value.
#Formula of closing inventory how to#
explain and demonstrate how to calculate the value of closing inventory from given movements in inventory levels, using FIFO (first in first out) and AVCO (average cost).discuss alternative methods of valuing inventory.define the cost and net realisable value of closing inventory.explain the IAS 2 requirements regarding the valuation of closing inventory.explain and demonstrate how opening and closing inventory are recorded in the inventory account.illustrate income statements with opening and closing inventory.explain the need for adjustments for inventory in preparing financial statements.Upon completion of this chapter you will be able to:
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