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Trouble with definitions regarding Inventory Costing

clioclio High PeakRegistered, Tutor Posts: 10
Understanding of Inventory Costing and NRV seems to be based on my understanding of 3 terms.
Conversion Costs
Costs to bring to current location and condition
Costs to complete

My text advises that the first two are included in a Cost scenario and the last is deducted from Selling Price together with Selling Costs to ascertain NRV.

Now my issue. Conversion Costs is cost to convert raw materials to end product. How is this different to Cost to Complete or indeed cost to bring to current Condition. All 3 seem to overlap.

Could some one please clarify for me.
N4T

Comments

  • PeterCPeterC Registered, Tutor Posts: 150
    There is some overlap.
    Conversion cost to date is part of cost to bring to current condition.
    Future conversion cost is part of cost to complete
  • clioclio High PeakRegistered, Tutor Posts: 10
    Thank you Peter.
    Am I right in thinking there is a point at which the product is deemed ready for sale. At that point costs are part of the product cost.
    If future remedial work or additions are needed that is going to be apportioned to the NRV calculation.
    One further point my text advises that storage costs of the completed product are not attributable to cost - would they be included in NRV calculation?
    Thank you
  • PeterCPeterC Registered, Tutor Posts: 150
    It don't think "ready for sale" is all that relevant. Goods at their present condition and location may or may not be ready for sale.

    Yes, future remedial work or additions need to be deducted to work out the NRV.

    I would not normally expect to see storage costs in an NRV calaculation
  • clioclio High PeakRegistered, Tutor Posts: 10
    Thank you
  • PeterCPeterC Registered, Tutor Posts: 150
    You're welcome
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