Chapter 3 Basic Costing. Inventory is also called stock What might the inventory for the following organisations be? What might the inventory for the.

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Presentation transcript:

Chapter 3 Basic Costing

Inventory is also called stock What might the inventory for the following organisations be? What might the inventory for the following organisations be? Sweet shop Sweet shop Garage Garage Hair dressers Hair dressers Tesco Tesco

Manufacturing businesses Manufacturing businesses will hold stock in different forms: Manufacturing businesses will hold stock in different forms: For example: For example: Raw material Raw material Work-in-progress Work-in-progress Finished goods Finished goods Lets have a go at the questions on page 53 Lets have a go at the questions on page 53

Why is it important for a business to value it’s stock or inventory? Why is it important for a business to value it’s stock or inventory? Are the costs of materials that you buy into your businesses likely to stay the same or change? Are the costs of materials that you buy into your businesses likely to stay the same or change?

Valuation methods FIFO FIFO LIFO LIFO AVCO AVCO Let’s have a look at the example on page 57 through to page 61 then we will have a go at calculating stock valuations using the different methods from page 62. Let’s have a look at the example on page 57 through to page 61 then we will have a go at calculating stock valuations using the different methods from page 62.

As mentioned previously, there are different types of stock – raw materials, work-in-progress and finished goods. The inventory valuation figures for the above are used in the calculation of summary figures that are needed by a manufacturing business. The summary figures of a manufacturing business are: direct materials used prime cost factory cost (or ‘manufacturing’ cost) factory cost of goods manufactured cost of goods sold The can be calculated for a week, month or year through using a cost statement called a manufacturing account