Ch. 7 Inventory

Ch. 7 Inventory - Inventory Chapter 7 Click to edit Master...

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Click to edit Master subtitle style 12/26/10 Inventory Chapter 7
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12/26/10 Types of Inventory Raw Materials Materials purchased that will be used in the manufacturing process Purchased only (not used yet) Work In Process Partially completed units Finished Goods Fully manufactured products ready for
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12/26/10 Costs Included in Inventory Costs included: Raw material cost Labor costs (Direct Labor) Manufacturing overhead Indirect manufacturing costs associated with producing the specific product in inventory (factory utilities/rent, etc.) Freight-In All of these separate inventory costs
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12/26/10 Accounting for Inventory There are two decisions that must be made (according to GAAP) regarding inventory: 1. The frequency of which the inventory account is updated and COGS is calculated § Perpetual vs. Periodic Methods 1. Cost Flow Assumption § Which goods are considered sold during changing prices and which are “retained” in
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Perpetual vs. Periodic Perpetual Detailed records of the number of units and the cost of each purchase and sale are prepared throughout the period (as the purchase/sale happens) Periodic
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Ch. 7 Inventory - Inventory Chapter 7 Click to edit Master...

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