Work-In-Process and Finished Goods Inventories companies can choose to value inventories in a variety of ways: Absorption
Question:
Work-In-Process and Finished Goods Inventories companies can choose to value inventories in a variety of ways:
- Absorption Costing: product costs are capitalized & period costs are expensed.
- Variable Costing: variable product and period costs are capitalized. Fixed product and period costs are expensed.
- Throughput Costing: only direct materials are capitalized.
I have also learned that Absorption costing is the method that companies need to use to reflect the value of the inventory asset on the balance sheet. The other methods may be beneficial to the company internally to help evaluate the costs of production. In relationship to the type of accounting, absorption costing is required for financial accounting, but variable or throughput costing may be more beneficial for management decisions and used as part of a company's managerial accounting information.
- we have to read Levi Strauss & Co. 2020 annual report and read What are absorption, variable, and throughput costing approaches?
- after, I need help also how to review Inventory Valuation in the Levi Strauss 2020 Annual Report.
- Estimate how the inventory value would change under each approach, and discuss the impact of the different results.
- Discuss which approach would be the most beneficial to the company.
Accounting Information Systems
ISBN: 978-1133935940
10th edition
Authors: Ulric J. Gelinas, Richard B. Dull