财管一班_第二组Inventory_costing.pptVIP

Inventory costing method Members:张苗苗 刘丽 胡蓉 胡晓晴 吴燕燕 顾曼云 秦杰 胡玉芳 Why Should We Study the Methods ? Determining the unit cost of inventory is easy when the unit cost remains constant during the period. But the unit cost often changes. For example, during times of inflation, prices rise. To compute cost of goods sold and the cost of inventory on hand, we must assign the businesss actual cost to each item sold. Inventory Costing Methods Specific-Unit Cost The specific-unit-cost method is also called the specific identification method. Some businesses usually cost their inventories at the specific unit cost of the particular unit. Such as: Automobiles, jewels, and real estate… Example: Weighted-Average Cost The Weighted-average cost method, often called the average-cost method, is based on the weighted-average cost inventory during the period. Weighted-average cost is determined as follows: divided the cost of goods available for sale (beginning inventory plus purchases) by the number of units available for sale (beginning inventory plus purchases); compute the ending inventory and cost of goods sold by multiplying the number of units by the Weighted-average cost per unit. First-in, First-out Cost FIFO : Under the FIFO method, the first cost into inventory are the first cost out to cost of goods sold. Ending inventory is therefore based on the costs of the latest purchases. FIFO: Last-in, First-out Cost Concept: Under LIFO, the last costs into inventory are the first costs out to cost of goods sold. Why the LIFO was cancelled? Thank You! * * L/O/G/O Specific-Unit Cost Weighted-Average Cost First-in, First-out Cost Last-in, First-Out Cost Not for: bushels of wheat, gallons of paint, or boxes of laundry detergent… A Chevrolet dealer may have two vehicles in the showroom-a “stripped-down” model that costs ＄14000 and a “loaded” model that costs $17000. 1 2 3 If the dealer sells the loaded model for ＄19000, cost of goods sold is ＄17000, the cost of the specific uni