Chapter 9
What’s on the Shelf? Inventory Costing
IN THIS CHAPTER
Determining what costs are included in inventory
Understanding the methods for recognizing cost of sales
Comparing variable and absorption costing
Deciding on a method to determine production capacity
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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