Valuing Stock

[Brett]

<BR>What is the usual elements that go into valuing Work in Progress stock ?<BR><BR>This is the part of stock control i cant seem to get my head around.<BR><BR>Thanks<BR>Brett

[bryan]

material cost<BR>labour cost<BR>production overhead cost, based on some reasonable basis like labour hours<BR><BR>If you use standard costing, base your valuation on this otherwhise any variance ncalculations become problematic

[Wayne]

Brett,<BR><BR>Before you calculate the WIP you will have to establish whether or not your accounts are based on either marginal or absorption costing. Under marginal costing fixed costs are charged to the contribution (profits) in the month in which they are incurred, therefore your WIP will only include (incidental) variable costs such as labour, materials, and variable o/h costs. Under absorption costing each unit of production will absorb a percentage of fixed costs, therefore any carried forward WIP balance will include an element of fixed costs which will be off set against future revenues.<BR><BR>You may not have covered Marginal or Absorption costing in your studies yet but these are the types of issue which must be considered when calculating the WIP balance.