Chapter 9

What’s on the Shelf?Inventory Costing

In This Chapter

arrow Determining what costs are included in inventory

arrow Understanding the methods for recognizing cost of sales

arrow Comparing variable and absorption costing

arrow Deciding on a method to determine production capacity

arrow Reviewing common problems in inventory accounting

If you’re starting a retail business, one of your largest investments is inventory. Say you start a gift shop. To attract customers and meet their needs, you need to stock the products they want; you need to spend money to fill your shelves. Decisions you make on accounting for inventory have a huge impact on pricing your products and ultimately on your profit.

This chapter presents the types of costs that are inventory-related. The idea is to assign a dollar amount as the total cost for each product. That sounds obvious (of course every item has a cost), but there are different methods for assigning costs. Your inventory value decision affects your cost of sales, and that ...

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