We are running a salt manufacturing company. The process is we harvest the crude salt and the crude salt we wash and centrifuge. Then the centrifuge salt is the raw material for our refinery plant.
Kindly help me to value the inventory of stock on each stage.
Currently we are considering the direct cost of crude salt to value the closing stock of crude salt. Harvesting cost is Rs. 100 p.mt Wages is Rs. 50 p.mt Hence the inventory value of crude salt is 150 p.mt Indirect cost is Rs. 100/-
But when we transfer this crude salt to washery unit (15% washing losses are there) we should consider the input cost is the direct cost of crude salt or we should add the indirect cost of crude salt also. ie we should take the input cost is Rs. 150 or Rs. 250 (including i.d cost) Input crude salt cost - Rs. 150 Washing loss 15% - Rs. 176 ie. (Rs.150*100/85 ie.(100-15)) Direct cost - Rs. 74 Hence the inventory value of washed salt is Rs.250 p.mt Kindly advice me on this regards. Thanks & Regards, Sugumar Email id: sugu.ksa@gmail.com
Guest
Guest
(Expert)
02 September 2017
Indirect cost should not cover administration expenses or marketing expenses. Otherwise indirect expenses like factory depreciation, machinery depreciation, factory rent, power etc can be included
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