Instead, the important criterion is that the information must be relevant for decisions that managers, operating in a particular environment of business including strategy, make. Since managers are making decisions only for their own organization, there is no need for the information to be comparable to similar information from other organizations. inventory: A detailed list of all of the items on hand.Ĭost accounting information is designed for managers.costing: The estimation of the cost of a process or product.raw materials: A raw material is the basic material from which a product is manufactured or made.Beginning Inventory + Purchases = Available for Sale - Ending Inventory = Cost of Good Sold.Companies most often use the weighted-average method to determine a cost for units that are basically the same. The weighted-average method of inventory costing is a means of costing ending inventory using a weighted-average unit cost. The LIFO (last-in, first-out) method of inventory costing assumes that the costs of the most recent purchases are the first costs charged to cost of goods sold when the company actually sells the goods.The FIFO (first-in, first-out) method of inventory costing assumes that the costs of the first goods purchased are those charged to cost of goods sold when the company actually sells goods.Firms find this method easy to apply when purchasing and selling large inventory items such as cars. The specific identification method of inventory costing attaches the actual cost to an identifiable unit of product.
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