far m8- inventory

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1、M8—InventoryStudyNotes-FARM8(Inventory)ClassificationsofInventoryForamanufacturingcompanytherearethreedifferentclassificationsofinventory.Theseare:1)Rawmaterials2)Work-in-progress3)FinishedgoodsForCPAFARexam,thefocusisontheaccountingforfinishedgoods.Theproductionprocessandtheallocationofco

2、stsintheproductionprocessarecoveredinthematerialonBEC.Whatshouldbeincludedintheinventorycosts?1)Allcostsnecessarytopreparethegoodsforsale2)Purchasepriceofthegoods3)Freight-in(freight-outisconsideredassellingexpensesexceptconsignmentsituationasdiscussedbelow)4)Normalhandlingcosts,spoilagean

3、dwarehousingcosts5)Fixedoverheadallocatedbasedonthenormalcapacityofproductionfacilities6)Abnormalcostsincludingtheunallocatedfixedoverheadcostsduetolowutilizationofcapacityshouldbeexcludedfrominventorycost.GoodsintransitGoodsintransitaregoodsthathavebeenshippedpriortoyearend,buthavenotyetb

4、eenreceivedbythebuyer.Towhomthegoodsbelongisdeterminedbythetermsofshipping.FOBShippingPoint-belongtothebuyerfromthemomentthatthesellergivesthemtotheshippingcompany.Thismeansthatwhilethegoodsareintransittheybelongtothebuyer.Thisisbecausetitlewastransferredattheshippingpoint.FOBDestination-b

5、elongtotheshipperuntilthebuyerreceivesthem.Thismeansthatwhilethegoodsareintransit,theybelongtothesellerandtitleistransferredatthedestinationpointonlywhentheyarereceivedbythebuyer.ConsignmentgoodsConsignedgoodsaregivenbyonecompany(theconsignor)toanothercompany(theconsignee)forthatsecondcomp

6、anytoselltotheendconsumer.Thisisdonebecausetheconsigneeisphysicallyclosertotheconsumeroritenablestheconsignortogetawiderdistributionofgoodsthanthe5M8—Inventorycompanycouldachieveonitsown.Themainissueisthatwhengoodsareconsigned,ownershipnevertransferstothecompanythatreceivesthegoods(thecons

7、ignee)tosellthemtotheendconsumer.Titlewillpassdirectlyfromtheconsignortotheendconsumer.Therefore,theconsigneeneverbearstheriskofloss(unlessacontractpassesthisrisktothem).Inreturnforsellingthegoods,theconsigneewillchargesomesortofcommissionorfeetotheconsignor.T