Raw materials transport costs Essay Example | Topics and Well Written Essays - 1000 words

Raw materials bear bes - Essay ExampleCarriage inwards are the be that are incurred as a burden of transporting raw materials into a firm, these comprises should be added to the value of goods purchased, and this means that the cost of raw materials should take the value of the goods purchased plus the transportation be incurred by the firm in transporting these raw materials. Carriage external is the cost of transportation of final or finished goods to the customer these costs are set as expenses and whence are recorded in the take in and loss account as an expense. whence from the above countersign on the cost of transportation which are carriage inward and outward it is evident that carriage inward which is the cost incurred in transporting raw materials into the firm should be included in the valuation of inventory and therefore require that they are added to the cost of raw materials, carriage outward which is the transportation of goods to the customer should be tr eated as an expense and therefore should not be included in the valuation of inventory.Work in keep is a term used to goods that are not yet finished goods, their value is included in the valuation of inventory, overhead costs are those costs that cannot be accountly traced to a particular products typesetters case rent and security costs, these costs are assigned to the product development an appropriate method whereby their cost is assigned to cost objects. Work in submit is omend by adding up the direct materials costs, direct advertize costs and the overhead costs, the overhead costs are assigned to the unit of production using an appropriate method, example the overhead costs at Lehman ltd are assigned to products using machine hours. smash-up costs should be included in the valuation of inventory, the costs of produced goods should include direct materials, direct labor costs and overhead costs, in this case the following overheads are includedFactory rent, rates and redress 50,000 sales office expenses 240,000 factory security 30,000 factory heat, light and power 450,000 sales commissions and selling costs 120,000 depreciation of machinery 230,000 depreciation of sales force vehicles 70,000 total 1,190,000 The overhead costs are assigned to products on the basis of machine hours and in this case it is evident that there were myriad machine hours, however euchre machine hours are included in work in progress, therefore for the finished goods have utilise 9500 machine hours.For the finished goods the following overhead cost should be assign to each product1,190,000/9500 = 125.26Therefore each finished good should be assigned 125.26 per machine hour it consumes.For the work in progress they have consumed 500 machine hours, should be assigned the overhead cost depending on a dowry set, example the company may decide that for the work in progress the overhead costs allow be assigned at 50%, if this is the case the work in progress overhead cost will be 62.63 per machine hour.Finished goodsThe table below summarizes the cost incurred by these goods and some costs that the goods may incurred, the following table summarizes the gross profit that will be gained as a result of modification and sale of these products.Stock LineA ()B()C()selling price500002000022000Costs incurred to date400001000015000modification costs1000040004000marketing costs500040005000cost of production550001800024000gross profit-50002000-2000We calculate the cost of production by adding up all the cost that the goods have incurred and those that are to be icnured, to make believe gross profit we subtract cost of production from the selling price which in this case stands for the tax that is to be gained, the gross profit for product A and C is negative while product B has a positive gross profit. Therefore product B will gain a profit and therefore it is best to modify and sell the product, for the other product the firm may