INVENTORY
AND
PRODUCTIO
CYCLE
, The cycle deals with:
The custody and safekeeping of inventory in whatever form it is, i.e. goods held for res
or
manufacture, and finished goods.
The recording of costs where a production/manufacturing process occurs.
Because of the diversity of business activities, each organization will have its own spec
requirements in relation to this cycle
For example: a wholesaler of consumer goods will be concerned only about sound proced
over receiving inventory, keeping it safe and secure for the time that it is in the warehous
and issuing the inventory to the retailer. The physical form of the inventory is not altered
comes in, is stored and it goes out when it is sold.
A motor manufacturer on the other hand,
has a far more complicated cycle to cope with. Component parts must be received, store
and must then be issued to the production department for the manufacture of the motor
vehicle. Once this has occurred, the motor vehicle must be transferred to a finished good
storage area, from where it will be removed (issued) when sold.
The manufacturer has to accumulate costs involved; costs of materials, wages incurred
manufacturing the items and production overheads.
Part of this cycle’s function is to control these costs.
production can take place on a “process cost” basis or a “job cost” costing basis
1. Process costing takes place when a large quantity of like items are manufactured on a
production line, e.g. hundreds of plastic chairs are being manufactured day after day..
2. Job costing takes place when a unique item (an item with its own specifications) or a sm
number of the same item are manufactured as a job
AND
PRODUCTIO
CYCLE
, The cycle deals with:
The custody and safekeeping of inventory in whatever form it is, i.e. goods held for res
or
manufacture, and finished goods.
The recording of costs where a production/manufacturing process occurs.
Because of the diversity of business activities, each organization will have its own spec
requirements in relation to this cycle
For example: a wholesaler of consumer goods will be concerned only about sound proced
over receiving inventory, keeping it safe and secure for the time that it is in the warehous
and issuing the inventory to the retailer. The physical form of the inventory is not altered
comes in, is stored and it goes out when it is sold.
A motor manufacturer on the other hand,
has a far more complicated cycle to cope with. Component parts must be received, store
and must then be issued to the production department for the manufacture of the motor
vehicle. Once this has occurred, the motor vehicle must be transferred to a finished good
storage area, from where it will be removed (issued) when sold.
The manufacturer has to accumulate costs involved; costs of materials, wages incurred
manufacturing the items and production overheads.
Part of this cycle’s function is to control these costs.
production can take place on a “process cost” basis or a “job cost” costing basis
1. Process costing takes place when a large quantity of like items are manufactured on a
production line, e.g. hundreds of plastic chairs are being manufactured day after day..
2. Job costing takes place when a unique item (an item with its own specifications) or a sm
number of the same item are manufactured as a job
