Inventory valuation - receipt from sub contractor

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Deepak Agrawal (Querist)
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04 August 2011 Had one doubt...

I sent 100 units of Raw Material (of Rs. 20 Each totaling to Rs. 2000) to sub contractor. Sub contractor charged Rs.50 for doing the processing work. Now i brought this material from sub contractor to my stores and i borne the freight of Rs.25.

So i wanted to know.. At what value i should value the new stock (after processing)..

Will it be valued @ Rs. 2050 (i.e Rs.2000 of Raw Material + Processing cost of Rs.50) or @ Rs.2075 (i.e Rs.2000 of Raw Material + Processing cost of Rs.50 + transport cost of Rs.25)...

I tried searching AS-2 also. But i didn't got relevant point related to sub-contracting.

Please reply at ur earliest.

CMA Ramesh Krishnan

CMA Ramesh Krishnan (Expert)
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04 August 2011 AS -2 suggesting the valuation need to be actual cost or net realisable value which ever is less

so you case actual cost of the material per unit will be Rs.2075 and what is the realisable value need to be find and compare the same and value

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