Inventory Valuation

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Inventory valuation is a major part of the ‘Costing Introduction Free Course’ and Accounting Trainees need a good understanding of inventory valuation.

You are part way through the Costing Introduction Free Course and before reading this page you should have read:
-Costing Introduction Free Course
-Costing Systems
-Cost Centres and Cost Behaviour
Accounting trainees should be able to explain how inventory (also called stock) is classified, valued and used to help managers calculate important management information for reporting and decision making.
Money tied up in inventory can be a major cost to many organisations particularly those in retailing and manufaturing.

You should be able to define and provide examples of:
raw materials
work-in-progress
finished goods

The Accounting examiner will expect you to value stock using the three methods given in the book:
FIFO
LIFO, and
AVCO

You should be able to write a report on the advantages and disadvatages of each method

The examiner will also expect you to produce a manufacturing account showing the build up of costs.

inventory valuation

Another popular topic with Accounting examiners is the concept of prime cost, factory cost and cost of goods sold.

Below is the Amazon link to the relevant books covering inventory valuation:


Now lets test your knowledge of inventory valuation and manufacturing accounts – please attempt the quiz below.

Inventory valuation and manufacturing accounts : QUIZ

Question 1
The name given to partly completed inventory in a manufacturing organization is called:

Question 2
The method of inventory valuation that assumes that the most recently acquired inventory will be used first, leaving the earlier acquisitions to make up the value of the remaining balance is called

Question 3
The total of all direct costs in a manufacturing account is called the _________ cost.



Question 4
A subtotal in the manufacturing account made up of prime cost and manufacturing overheads is called:

Question 5
Pies held by a pie manufacturer would be classified as work in progress- true or false?

Question 6
Flour held by a pie manufacturer would be classified as:

Click on the link below for the next topic:
-Labour Costs

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