Free

Cost Flow Assumptions - Assignment Example

Add to wishlist

Summary

The paper "Cost Flow Assumptions" states that in the LIFO method, it is assumed that goods are sold in the reverse order of its purchase. As a result, the cost of sales is mostly based upon the most recent costs. The average method is the best way among other cost flow assumptions. …

Download full paper File format: .doc, available for editing

GRAB THE BEST PAPER91% of users find it useful

Read Text Preview

Subject: Finance & Accounting
Type: Assignment
Level: High School
Pages: 1 (250 words)
Downloads: 2
Author: audrey10

Extract of sample "Cost Flow Assumptions"

Cost flow assumption means that order in which costs are removed from inventory. This is not like physically moving inventory but taking the cost of inventory to the cost of goods sold. This can be done by using any of the three cost flow methods.First In, First Out (FIFO)Last In, First Out (LIFO)AverageThese methods are important since they value inventory. With the valuation of inventory, the costs of inventory can be identified. And that identified cost can be used in the income statement and balance sheet as well.

The FIFO method assumes that merchandise is sold in the order of its receipt (Siegel, 2000).FIFO measures the unit costs, and there are two units of costs for the period.First, beginning work-in-progress units are completed;And units started and finished in the same period.FIFO method assumes that the beginning work-in-progress is assumed to be completed and transferred first

Cite this document

APA
MLA
CHICAGO

(Cost Flow Assumptions Assignment Example | Topics and Well Written Essays - 250 words, n.d.)
Cost Flow Assumptions Assignment Example | Topics and Well Written Essays - 250 words. Retrieved from https://studentshare.org/finance-accounting/1576513-intermediate-accounting

(Cost Flow Assumptions Assignment Example | Topics and Well Written Essays - 250 Words)
Cost Flow Assumptions Assignment Example | Topics and Well Written Essays - 250 Words. https://studentshare.org/finance-accounting/1576513-intermediate-accounting.

“Cost Flow Assumptions Assignment Example | Topics and Well Written Essays - 250 Words”, n.d. https://studentshare.org/finance-accounting/1576513-intermediate-accounting.

Cited: 0 times

CHECK THESE SAMPLES OF Cost Flow Assumptions

The Cost of Equity Capital and the CAPM

The required rate of return is very sensitive to the inputs used in the DDM constant growth formula and hence the value of required rate of return is as good as the assumptions used by an analyst.... Lastly, an analyst should be aware of the fact that the output of the model is very sensitive to the inputs used and the model's accuracy largely depends on the assumptions used by an analyst.... Following equation can be used to calculate the required rate of return in CAPM: One of the assumptions of CAPM is that the shareholders are risk averse and they make the decision to invest in a stock based on the mean return and variance of returns of their total portfolio ....

6 Pages (1500 words) Essay

Fundamentals of Finance

This essay will cover the analyses of the various cost alternatives, as well as additional assumptions that might have to be introduced in order to make this a more real-world example.... The company can also buy a new high specification platform at a cost of £14M plus installation costs of £1M and still has an estimated life of 5 years.... There also is an associated flotation cost of 2% of par value.... 2) PREFERRED STOCK: the company can raise an unlimited amount of preferred stock under the following terms; (a) the security has a par value of £100/share, (b) the annual dividend rate is 6% of the par value, (c) the flotation cost is expected to be £4 per share....

11 Pages (2750 words) Essay

Homework

% LIFOFIFOAverage CostEnding inventory$$$Cost of goods sold$$$Gross profit$$$Gross profit rate%%%(b) Compare results for the three Cost Flow Assumptions.... FIFOLIFOAverage-CostEnding Inventory$$$Cost of goods sold$$$FIFO:Ending Inventory = 10,400Cost of goods sold = 25,600LIFO:Ending Inventory = 8,000Cost of goods sold = 28,000Average - Cost:Ending Inventory = 9,600Cost of goods sold = 26,400Which cost flow method would result in the highest net income?... ns: FIFO Which cost flow method would result in inventories approximating current cost in the balance sheet?...

2 Pages (500 words) Speech or Presentation

Net Cash Flow Task 2

Secondly, the sensitivity of the project to variations in the assumptions would be very high, and small changes in the assumption would upset the entire calculation.... If… e depreciation for the second year becomes zero, the net income for tax purposes goes up correspondingly, resulting in higher tax payment and lower cash flow. a) Explanation for the recommendation: The Net Present value is positive at the cost of capital to the company, and Net Cash flow Task A Task A, which needs to be completed in order to do the questions in Task B, was completed using MS-Excel....

2 Pages (500 words) Coursework

Case Studies (Laura Martin)

The unused cable capacity of Cox communications can be included into the discounted cash flow analysis, through... They scrutinize the financial reports of a company, and conduct interviews with the management and industry professionals.... Executives who aim to achieve sound… They are mostly employed in security firms, banks, mutual funds, hedge funds, pension funds and insurance companies....

4 Pages (1000 words) Research Paper

Institution Affiliation

While net realizable value is generally the selling price less any additional costs incurred in Week Six Assignment Affiliation Problem Determining and Evaluating the Effects on the Balance Sheet, the Income ment and the Cash Flow Statement of Four Different Cost Flow Assumptions for Inventory 1.... Of FIFO and LIFO, which method would produce the more favorable cash flow?... FIFO method would produce the more favourable cash flow because it has higher total ending balance....

2 Pages (500 words) Speech or Presentation

Management Account

It follows the natural flow of inventories, that is, those arrived first will be out first.... his method decides that the cost of the goods sold during the given period comes from the most recent raw material purchases.... The paper "Management Account" considers particular actual and budget terms and analyzes the given information....

6 Pages (1500 words) Assignment

Financial Reporting Disclosures in the Australian Corporate Sector

The company also needs to ensure that sensitivity analysis is done in case there are changes in key assumptions used during financial reporting.... The importance of carrying out a sensitivity analysis to changes in key assumptions is due to the need to evaluate variations and their effects on financial reporting.... It is also important to note that valuation approaches during disclosure needs to be financial ratios and discounted cash flow....

8 Pages (2000 words) Essay