Material Costs, Inventory Valuation & Labour Costs

Question 1

What are the 3 main costs that business incur ?

Answer 1

Labour, material, expenses

Question 2

MC: what are the reasons of knowing the cost of inventory ?

Answer 2

Value of goods issued ( issued for the next stage or sale)
Value of goods held ( inventory)

Question 3

MC: What is FIFO?

Answer 3

First In First Out: assumes the oldest items are used first so that inventory is valued at the most recent price

Question 4

MC: What is LIFO?

Answer 4

Last In First Out: assumes the latest item as are used first so that inventory is valued at the oldest price

Question 5

MC: What is WAC/ AVCO?

Answer 5

Weighted Average Cost/ Average Cost: assumes there is no pattern of order therefore inventory is valued at the same price which is the average one.

Question 6

Which inventory valuation method is not allowed by IAS Inventories 2?

Answer 6

LIFO

Question 7

LC: true or false - “ labour cost can be one of the most expensive elements within the cost of unit, especially for service industries “

Answer 7

True

Question 8

LC: what increments can be used to work out labour ?

Answer 8

Per hour
Per unit

Question 9

LC: what factors effect labour costs ?

Answer 9

Wage rates by other businesses
National/living rates imposed by government
Government incentives
Local employment conditions - availability of skilled &/unskilled workforce
Employer costs above gross salaries

Question 10

Where are stocks stated?

Answer 10

Lower of cost and net realisable value