AAT Comment: Study tips - valuation of raw materials

AAT_Team

In part one of this series on inventory valuation methods, we reviewed why and how raw materials are processed and controlled as part of the manufacturing process.

We also looked at the characteristics of the three common methods available. Having covered the theory, we’re now going to put it into practice and calculate the cost of issues and the value of closing inventory using FIFO, LIFO and AVCO.

Let’s return to the inventory record for raw material SSt14, which you may remember are sheets of stainless steel, and assume the records show that the 5,000 in stores were all bought at the same time.

[Full article.]