Inventory and Production Cycle
Auditing and Internal Control 2022
Semester 2 - Learning Unit 3
Introduction and Characteristics of the Cycle
Different types of Inventory
Recording of the costs
Costing system (Manufacturing companies use
costing systems as a means of controlling
usage of raw materials, production equipment,
labour hours etc).
Process costing:
• used mainly in manufacturing where units
are continuously mass-produced through
one or more processes.
• Eg. erasers, chemicals or BMW.
Job costing:
• used by companies that produce unique
products or jobs
• Eg. Spero Villioti – custom – made dresses
Flow of costs in Job costing
Manufacturing
Costs
Work in Process
Inventory
Assigned to
Finished Goods
Inventory
Completed
Cost of Goods
Sold
Sold
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IAS 2 INVENTORIES
Cost of inventory includes:
- All costs of purchase
- Cost of conversion
- Other costs incurred in bringing inventory to
its present condition.
1. What are the different types of inventory
valuation used in manufacturing companies
today?
First-in-first-out (FIFO)
“oldest inventory will be issued or sold first”
Weighted average method (WAM)
“calculation of a new average cost each time
inventory is required”
Synonyms
Word
Synonyms
e.g. Interface
Interact
Obsolete
Out-dated
Word
Synonyms
Characteristics
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