About This Chapter
Inventory Cost & Valuation - Chapter Summary
Use this chapter to get up to speed concerning everything you need to know to calculate inventory cost and determine valuation. Throughout the lessons, you'll review vital formulas for determining marginal, direct, variable, and fixed costs. Other topics covered in this chapter are as follows:
- The income components and activities of merchandising companies
- Merchandise inventory items
- The types and methodologies of inventory costs
- Inventory purchases and accounting practices
- Periodic and perpetual inventory systems
- Recording inventory sales
- An explanation of the four major valuation methods
- Identifying the inventory and determining the net realizable value
You can check out this and other business-related chapters the moment you become a member of Study.com. Membership grants you an all-access pass to our entertaining video lessons, well-structured text-based lessons, and assessment tools. You also get the added bonus of being able to communicate with our instructors, should you have any questions about chapter topics.
When you become a member, you will have your own user dashboard. This interface lets you monitor your progress. For example, if you only have the time to study once a week, you may not remember exactly where you left off. Fortunately, the interface keeps track, so you can jump right back into your studies without fear of skipping a lesson. The dashboard will also show you suggestions on other chapters or courses that may interest you.
1. Merchandising Company: Definition, Activities & Income Components
Do you know what a merchandising company is? If you said it's a store, you are right. It is a store, but it is also so much more. In this lesson, we are going to discuss some of the major components of a merchandising company.
2. Items that Make Up Merchandise Inventory
In order to operate, merchandising companies must carry inventory. What exactly makes up merchandise inventory? In this lesson, you will not only learn the answer to that question, but also several other important factors that relate to merchandise inventory.
3. Inventory Cost: Definition, Methods & Types
Have you ever thought about how much it costs a business to keep inventory in stock? It's not just the price the business pays for the items that it keeps in stock. It is so much more. In this lesson, we will discuss exactly what constitutes actual inventory cost.
4. Accounting for Inventory Purchases
A merchandising company must purchase inventory, and it has to be accounted for in the accounting records. In this lesson, you will learn how to calculate inventory purchase amounts as well as how to record them in the accounting journals.
5. Perpetual and Periodic Inventory Systems
Inventory management is an important part of business success. In this lesson, we will discuss the two types of inventory systems used in accounting today.
6. Accounting for Inventory Sales
In order to operate, a business must make sales. In this lesson, we are going to discuss sales of inventory. You will learn the types of sales made, the items that affect sales profit, and the way to record sales in the accounting records.
7. Marginal Cost: Definition, Equation & Formula
Marginal cost is an important concept in business. In this lesson, you'll learn what marginal costs are and their standard formula with some illustrative examples. A short quiz follows the lesson.
8. Variable Cost: Definition, Formula & Examples
In this lesson, we'll be looking at variable costs, which are those costs that change directly with production. After the lesson, you can test your knowledge with a short quiz.
9. Direct Cost: Definition, Formula & Examples
This lesson explains direct costs. Included in the lesson is how they are calculated. You'll also have the chance to examine examples of direct costs.
10. Fixed Costs: Definition, Formula & Examples
Understanding an organization's cost structure is essential for management to make appropriate investments. In this lesson, you'll learn the definition of fixed costs and why understanding fixed costs is an important part of financial management.
11. Inventory Valuation Methods: Specific Identification, FIFO, LIFO & Weighted Average
This lesson introduces you to the cost flow assumption methods of specific identification: FIFO, LIFO, and weighted average. You will also learn how to compute inventory in a perpetual system using the methods of FIFO, LIFO, and weighted average.
12. Net Realizable Value of Inventory: Definition & Method
Calculating inventory value is essential for correct reporting in accounting records. In this lesson, we are going to discuss what net realizable value is and why it plays an important role in inventory valuation.
Earning College Credit
Did you know… We have over 200 college courses that prepare you to earn credit by exam that is accepted by over 1,500 colleges and universities. You can test out of the first two years of college and save thousands off your degree. Anyone can earn credit-by-exam regardless of age or education level.
To learn more, visit our Earning Credit Page
Transferring credit to the school of your choice
Not sure what college you want to attend yet? Study.com has thousands of articles about every imaginable degree, area of study and career path that can help you find the school that's right for you.
Other chapters within the Business Communications: Help & Review course
- Business Communication Framework
- Spoken & Written Messages
- Preparing Written Messages
- Communicating Electronically
- Delivering Good & Neutral Tone Messages
- Delivering Bad News Messages
- Delivering Persuasive Messages
- Reporting Process & Research Methods of Business Communication
- Managing Data & Using Graphs in Business Communications
- Organizing & Preparing Reports & Proposals
- Designing & Delivering Business Presentations
- Preparing Job Applications
- Management Theory
- Organization in Business Management
- Motivation & Management Theories in Business
- Decision Making & Problem Solving Strategies
- Principles of Change Management
- Control as a Function of Management
- Basic Financial Statements
- Fundamentals of Microeconomics
- Online Privacy & Security
- Understanding Enterprise Business Systems