Скачать с ютуб Different methods of inventory valuation.understand basic concept. в хорошем качестве

Different methods of inventory valuation.understand basic concept.

In this video I will Discuss different types of Inventory Valuation Methods There are three methods for inventory valuation: FIFO (First In, First Out), LIFO (Last In, First Out), and WAC (Weighted Average Cost). In FIFO, you assume that the first items purchased are the first to leave the warehouse. In other words, whenever you make a sale. In LIFO, you make the opposite assumption: that the last items that enter your store are the first ones to leave. The WAC method uses the item’s average cost throughout the year. The average cost per unit is calculated by dividing the total cost by the total number of units purchased during the year. Average Cost Method: Under this method, all items in the stores are mixed up in such a way that consumption of materials or sale of finished goods cannot be recognised from any particular lot of purchases. The average cost may be: (i) Simple Average Cost; and (ii) Weighted Average Cost (i) Simple Average Cost: Under this method, average of different prices are only considered without having regard to the quantities involved. The simple average cost is calculated by adding the different prices and, thereafter, divided by the total number of purchases. This method is applicable where there is wide fluctuation in prices. ii) Weighted Average Method: Under this method, rate of average cost is calculated by taking into consideration both the prices and quantities acquired at such prices, i.e., the total value of materials in stock at the time of issue divided by the total quantity of materials in stock in order to find out the weighted average rate. It is superior than the ordinary Simple Average Method . Base Stock Method: Under this method, it is assumed that every firm has to maintain a certain minimum amount of inventory (in the form of raw materials, work-in-progress and finished goods) throughout the year. The same will have to be maintained for meeting emergency needs, such as undue delay in supply of raw materials, excessive consumption etc. This minimum level of inventory goes by the name of Base Stock or Safety Stock. ‘Base-Stock’ serves as the signal below which the inventory level of a firm is never allowed to fall. (Therefore inventory, to the extent of ‘ . This method of valuation is adopted where each item of inventories and its actual cost is identifiable. But this method suffers from the following limitations: 1. Where there is bulk quantities of inventories, partly finished goods or finished goods, and where individual units of inventories lose their identity. 2. Where there is innumerable units of inventories, keeping records for each of them becomes expensive as well as time-consuming. Other Method of Valuation of Inventory — Other than those based on Historical Cost: Some of the important methods of valuation of inventory (other than those based on historical cost) are noted below: (a) Standard Cost: Under this method, closing inventories are valued at pre-fixed standard rates. This method is found suitable where the manufacturing units are engaged in production on a large scale. But this method cannot reveal the true value of inventory when production is completed after passing through several processes or w (b) Inflated Cost Method: Under this method, closing inventories are valued at a cost per unit which is higher than the actual cost per unit to provide for the normal loss due to certain defects inherent in them, e.g. loss due to evaporation, shrinkage etc. (c) Reverse Cost Method: Under this method, inventories are valued at an estimated cost which is determined by deducting an amount equivalent to the normal profit margin and the estimated cost disposal from the current selling prices. This method is also referred to as ‘Adjusted Selling Price. (d) Replacement Cost Method: Under this method, each closing item of inventory is valued at cost which is to be incurred for purchasing/procuring the said item from the open market on the date of valuation, i.e., they are valued at the replacement cost as on that date.. (e) Realisable Market Value: Under this method, each closing item of inventory is valued at its estimated net realisable value. The net realisable value —i.e., prospective selling price less all prospective costs. Please watch my videos on following links and subscribe my channel https://www.youtube.com/watch?v=T8lGF... https://www.youtube.com/watch?v=UeZ0l... https://www.youtube.com/watch?v=jnE60... https://www.youtube.com/watch?v=YG5Vx... https://www.youtube.com/watch?v=0oMjN... https://www.youtube.com/watch?v=BM0Z1... https://www.youtube.com/watch?v=RHFs_... https://www.youtube.com/watch?v=cmNkX... https://www.youtube.com/watch?v=S-Ht_... https://www.youtube.com/watch?v=Yhq0u... • Connect on face book   / anita.soni.7.  . • Connect on Instagram   / anitasoni58  . • Mobile 9256939872 • 302 G block Wave garden sector 85 • Mohali SHOW LESS