- October 29, 2015 at 7:47 am #279487
I have a general query and as you have more expertise you may give me valuable explanation.
A company normally hold inventory some for sale and some for maintenance (after sales) can we have same equipment as for sale and as spare part? If yes can we value them differently(ex avco) ?
ThanksOctober 29, 2015 at 8:38 am #279493
We’ve already been through this! A motor is a motor is a motor! If it’s a motor, it’s valued as a motor, the same way as the other motors are valued.
So, if it’s identical to other inventory, then it’s valued identically to the other inventory.
Imagine this. One of the motors has been set aside as a spare part for maintenance purposes. You have two others in inventory held for sale.
What happens when I walk into your premises and say that I want three motors? Are you going to turn to me and say “You can’t have three, you can only have two” But I can see three, just behind the counter. You’re about to create a very unhappy customer! Of course you’ll sell three to me and immediately order replacements from your supplierOctober 29, 2015 at 8:56 am #279500
Thanks u. Ok if i sold a special type of router which i classified as for sales equipment. I do a contract with the customer if ever it broken i will replace it immediatly. Hence i need to keep same as spare part. Right? And i value them separetly as once it will replace it will be expense for me. Am i correct.?October 29, 2015 at 10:17 am #279505
Yes, but what happens if your customer has two faulty routers on the same day? You’re in trouble! So make sure that you have in inventory sufficient routers to cater for just such an emergency.
This is all in F2 under the heading Inventory Control and the Economic Order Quantity. Unless you can operate a super-efficient just-in-time inventory ordering system, you’re going to have to hold some inventory and, to continue the previous posts, if it’s a motor, it’s a motorJanuary 4, 2016 at 5:49 pm #293444
Wish u a happy new year.;)
I wanted to share some real life experience and which make me puzzle. Recently i bought a portable dvd. However it got broke i contacted the supplier and he had to repalce the item. Was wandering so the other one was as a spare part. How to valued this?January 5, 2016 at 8:28 am #293471
If it’s broken, then the value of the returned dvd player can only be the cost value of the re-usable parts
Does that do it for you?January 5, 2016 at 5:43 pm #293499
Well yes. I asked them do they value it separetly they said yes one as equipment and other as spare part. It item is same but the use for them are different.January 6, 2016 at 3:17 pm #293589
No, that doesn’t do it for me! It’s not just the name that needs to be different. The aggregate cost of all components will be lower (probably substantially lower) than the value attributable to a part used machine
“one as equipment and other as spare part.” is not enough!January 6, 2016 at 4:31 pm #293598
So how should they value both with one weighted average ?January 6, 2016 at 7:18 pm #293620
No! One is in a salable condition and should be valued at cost
The other (the one that has been returned because “However it got broke i contacted the supplier and he had to repalce the item. Was wandering so the other one was as a spare part.”) should be valued (as I have already indicated above!) as the aggregate of the cost price of the individual component re-usable parts
“So how should they value both with one weighted average ?” – they are no longer the same product. One is available for sale. The other is an incomplete collection of spare parts that happen to be included within one unit and is not available for sale. It can only be cannibalised to provide parts necessary to repair other dvd machinesJanuary 7, 2016 at 4:25 pm #293702
Ok good . so same goods can be valued differently if they have different use for that particular company. That answer my question.January 7, 2016 at 5:04 pm #293708
“Ok good . so same goods can be valued differently if they have different use for that particular company. That answer my question.”
In the last paragraph of my previous post I point out that THEY ARE NO LONGER THE SAME PRODUCT
If they are (and in the scenario that you have set up, they are not), then you would value them at the same amount. The purpose to which the company intends to put these products is irrelevant. One to be used for sale and the other possibly to be used for cannibalisation? It doesn’t matter! If they are identical, then the value must be the same
If there is a third item that has already been part used as spares, then that third product is NOT IDENTICAL because it’s no longer in a condition to be sold. It’s no longer the same product. And this third item will be valued at the aggregate of the reusable separate parts still within the shell of the product
But you are incorrect to say “”Ok good . so same goods can be valued differently if they have different use for that particular company. “
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