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Sir I couldn’t understand this..Help pls
How to we calculate coat of goods sold for I/S?? should I include all direct and indirect costs?? like depreciation, raw material, direct labour,repair and maintenance, fuel cost, water costs, electricity costs etc to arrive at cost of goods sold..??
There is a method to value inventory.. which is lower of cost and NRV.. what is the difference between this two methods..!!! and while calculating selling price don’t they include all dorect and indirect cost and add margin to arrive selling price?? if they do why shoul I again consider those indirect cost in the cost of goods sold??The cost of goods sold is all costs of production i.e. all costs in the factory, whether direct or indirect.
For the determining the cost of inventory, the same rule applies – we include all costs of production.
The rule about taking the lower of cost and NRV is separate. The cost is calculated as stated above. The NRV is the expected selling price (less any further costs that will be incurred before sale). Usually the NRV will be higher than cost (otherwise the business would be operating at a loss) and therefore usually cost will be the lower.
However, the rule is there in relation to any items in inventory that are going to have to be sold at lower than cost (because, for example, they are damaged or are old). In that case those items must be value at the NRV.Please watch my free lectures on the valuation of inventory. The lectures are a complete free course for Paper F3 and cover everything needed to be able to pass the exam well.
Thank you so much sir..
sir another question.. how can I value WIP?? is there any lecture in opentuition relating to this topic??
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