Inventory of raw material, Financial Accounting

Assignment Help:

1) Inventory of raw material are held to make sure that the production process is not disrupted because of shortage of raw material. The amount of raw material inventory would based upon the speed at that the raw material can be procured; the greater the speed and lower would be the stage of raw material inventory. Higher the improbability in the supply of raw material, higher would be the level of raw material inventory.

2) Work in process i.e. WIP inventories occur in the process of production. This type of inventories is also considered to as "Process Inventories". Under case of easy products the WIP inventories would be less, while in case of complex products needing various sub-processes and sub-assemblies the work in process inventory would be high.

3) Finished goods inventories are held to meet customer's need promptly. The quantum of finished services or goods inventory would based upon:

  • Time needed to fill an order from the customer. If the products is of that nature which any unexpected demand can be met at short notice the level of inventories would be lower, and
  • Variety of the product line: Firms selling a broad range of products normally need to invest more in finished goods.

4) Inventories are also conduct; hence the order cost is reduced.

5) Spares: An inventory of spare items which are required for the smooth running of business is also kept.

6) Transaction or Precautionary and Speculative Motives: Inventories that are held for conducting normal everyday business are termed as transaction inventory. Precautionary inventories are those inventories that are held to make sure that in case of shortage or adverse price movement, the production process will not be stopped because of the lack of inventory.


Related Discussions:- Inventory of raw material

Return on investment, Return on Investment (ROI) - Ratio measure of the pro...

Return on Investment (ROI) - Ratio measure of the profits achieved by a firm by its fundamental operations. An indicator of management's general efficiency andeffectiveness. The si

Calculate and graph the average annual returns , This is an individual asse...

This is an individual assessment contributing 50% of your marks for the module. The assignment is intended to help you develop skills of implementing financial models in Excel. The

Acquisition Merger, Can you combined the PVH & Warnaco Group Balance Sheet ...

Can you combined the PVH & Warnaco Group Balance Sheet after merger?I will an attached the excel worksheet that includes the instructions

What should be didde''s 2011 earnings per common share, Didde Co. had 300,0...

Didde Co. had 300,000 shares of common stock issued and outstanding at December 31, 2010. No common stock was issued during 2011. On January 1, 2011, Didde issued 200,000 shares of

Accounting concepts, What is implication of applying accounting concepts wr...

What is implication of applying accounting concepts wrongly.

Adjusting Entry for these Accounting statements?, In June 2012 Company has ...

In June 2012 Company has supplied some goods to a customer on a sale on return basis. The value of the goods was Rs. 120,000. The company recorded this transaction as credit sale,

Uncertainty of cash flows, Individuals commonly prefer possession of cash i...

Individuals commonly prefer possession of cash immediately or in the present moment quite than the same amount at any time in the future. Such time preference is fundamentally due

State the relationship between return and risk, State the relationship betw...

State the relationship between return and risk This relationship between return and risk has significant implications for setting financial objectives for a business. Owners wil

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd