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

Which is not necessary in order for corporation to pay cash, Q. Which one o...

Q. Which one of the following is not necessary in order for a corporation to pay a cash dividend? a. Adequate cash b. Approval of stockholders c. Declaration of dividends by the bo

Holding company, define the term of pre-acquisition diviend

define the term of pre-acquisition diviend

Prepare a statement to show the total production overheads, Aristo Ltd uses...

Aristo Ltd uses a system of absorption costing. The product passes through a machining department and an assembly department before it is completed. The assembly department is labo

Extent of tests of control, Extent of Tests of Control -Every year AUDITOR ...

Extent of Tests of Control -Every year AUDITOR should obtain sufficient evidence about whether company's internal control over financial reporting, including controls for all inter

Limited liability company, Limited Liability Company (LLC) - Form of doing ...

Limited Liability Company (LLC) - Form of doing business combining limited liability for all owners (known as members) with taxation as a PARTNERSHIP. An LLC is formed by filing AR

Explain briefly two methods of calculating depreciation, QUESTION 1: Th...

QUESTION 1: The Alpha Company Ltd was registered with Nominal Capital of 60,000 Equity shares of Rs.10 each. The following were the ledger balances on 31st March 2011.

Determine the types of hedging , Go to your assigned corporation's website ...

Go to your assigned corporation's website and access their latest annual report. Answer the following questions regarding their derivative and foreign currency transactions. 1.

History of trust-trusts laws and accounts, History of trust The followi...

History of trust The following general information should be kept with the trust documents: Summary of will or trust deed; Short history of the trust; Trustees’ nam

Determine the growth rate of the nominal money supply, The income elasticit...

The income elasticity of money demand is 2/3. Real income is expected to grow by 4.5% over the next year, and the real interest rate is expected to remain constant over the next ye

IRR, what managers should know about internal rate of return( IRR) and wh

what managers should know about internal rate of return( IRR) and why

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