Cost Measurement - Spoilage, Cost, and Inventory Flow Flashcards Preview

CPA - BEC > Cost Measurement - Spoilage, Cost, and Inventory Flow > Flashcards

Flashcards in Cost Measurement - Spoilage, Cost, and Inventory Flow Deck (5):
1

Spoilage and Scrap

A) Some spoilage and scrap may be normal. It is included with other costs as inventorial product cost

B) Spoilage and scrap can also be abnormal, such as when it is due to carelessness. Abnormal spoilage operated and deducted as period expense

Sale of scrap -- If the amount of scrap is immaterial, any monies received from the sale of scrap can be used to reduce factory overhead, and thereby reduce Cost of Goods Sold. Alternatively, if the value of scrap is significant and is saleable, it can be treated as "other sales" in the revenue category.


2

Flow of Costs and Inventory Valuation

A) Wholesale an retail organizations - Purchase items they sell, inventory calculations are simple. Under periodic inventory method, inventory counted at end of period and valued, typically using FIFO, LIFO, or weighted average. Ending inventory is then subtracted from goods available for sale (value of beginning inventory + purchases) to determine COG

Beginning Inventory + Purchases = Goods available for sale

- ending inventory = COG

3

Flow - Manufacturing Organizations

Manufacturing maintain 3 inventories instead of 1:
Raw materials, WIP, finished goods

*******Costs flow from raw materials through WIP and into finished goods. As items are sold, cost flows from finished goods to COGs. Ending balance of three inventories is added together and reported as a single line on BS

4

Schedule of Cost of Goods Manufactured (Raw Materials and WIP)

This schedule calculates dollar value of goods that were completed during period and transferred to finished goods. Primarily an analysis of WIP account (BEG balance + Total Manufacturing Costs - Ending Balance = COG manufactured)

5

Schedule of COGs

This schedule is produced by analyzing the Finished Goods Inventory - Calculates COGs

Beginning FG + COGs Manufactured = Goods Available for Sale

- Ending Finished Goods = COGs

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