Costing & Inventory Management
Some business companies are related with construction activities such as hotel, school, road, bridge, condo, flat, building construction etc. In practice for simple method, Cost of construction = material cost + labour cost + overhead cost=specific cost + common cost Each cost of construction may have specific cost and common cost. Specific cost for specific project will not be allocated
Continue reading Cost of Fixed asset may occur via two ways : buying and self construction. 1.Buying Fixed Asset Cost of fixed asset = purchase price-trade discount-sale return and allowance+ freight + insurance + import taxation + Specific tax (if any) + VAT Input ( if we cannot claim VAT input)+port fee + clearance cost + handling cost + other relevant costs
Continue reading Cost of service can be applied to an individual customer or as an average cost of service for a group of similar customers. Each customer has each cost of service but similar customers & services we should use average cost for each customer for management purpose. Cost of service = material + labour + overhead Example ABC Company is research
Continue reading Cost of Inventory-Products for manufacturing company Cost of Inventory for manufacturing company The examples of manufacturing company are as follows. Company manufactures and sells phones, computers, scanners, LDC Company manufactures and sells cars, motor Company manufactures and sells furniture Company manufactures and sells TV Cost of finished goods = cost of material + conversion cost Cost of material = purchase
Continue reading Cost Classification by function-Example Manufacturing Company has the following costs: – Cost of direct materials………….. ……$200,000 – Direct labor…………………………………$500,000 – Factory overhead………………………….$100,000 – Office rental…………………………………$20,000 – Office salaries……………………………….$90,000 – Depreciation of office equipment……$9,000 – TV advertisement………………………….$10,000 – Interest expense…………………………….$5,000 – Delivery cost to customers………………$6,000 Required: You are required to classify above costs by function. Solution: Types Of Cost Costs Explanation
Continue reading Cost of Inventory- Merchandise/Goods Cost of Inventory for merchandising company The examples of merchandising company are as follows. Company purchases and sells phones, computers, scanners, LDC Company purchases and sells cars, motor Company purchases and sells furniture Company purchases and sells TV Cost of inventory = purchase price-trade discount-sale return and allowance+ freight + insurance + import taxation + Specific
Continue reading Methods of Calculating the Cost of Inventory We will explain three main methods of calculating cost of inventory: specific cost, FIFO (First in, First out) and AVCO (average cost). Specific cost: When items of inventory are individually distinguishable and of high value, so we will use unit cost (actual cost or specific cost). FIFO or AVCO (average cost) : Where
Continue reading Target Costing Target Costing – Involves setting a target cost by identifying target selling price and then deducting the required profit margin to reach a target cost. There are the following seven steps to implement target costing Product specification : determine a product specification of which an adequate sales volume is estimated. Target selling price: we will decide a target
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How to record full inventory cost for manufacturing company There are three types of inventory for manufacturing company: raw material, work-in-progress (also known as work-in-process or abbreviation as WIP), and finished goods. Inventory is current asset. Raw material inventory has not yet been put into production. They are stored in warehouse before covert them to work-in-progress (WIP) and finished goods. Raw
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Absorption Costing (AC) and Activity- Based Costing (ABC) for Inventory Freight | Transportation Absorption costing is traditional costing method while Activity- Based Costing ( ABC) is modern costing method. Absorption costing is simple way and less time consuming for calculation, but Activity-Based Costing ( ABC) is complex way and more time consuming. Activity-Based Costing ( ABC) is more accurate than
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