Urgent working capital management

in calculation of working capital management according to cash cost basis or traditional approach basis

what expenses are included in calculation of finished stock

raw material

direct wages

overheads

sales promotion exp

im asking this query because in practice manual recently updated finished goods carry all expenses incl. sales promotion selling overheads etc,

and in study material finished goods stock is calculated on direct expenses only no selling and overheads are added in  calculation

what is the correct answer in calculating the finished goods do we need to add sales promotion exp, selling expenses overheads or not??

management of working capital

 

Replies (3)

Yes,

 

you should take sales promotions exp & selling cost Overheads for calcualting Finished Goods.

Even though ur IPCC are over now, you may not need the answer now...

Nevertheless, Answer is NO, you shouldn't 

Finished goods are calcuated either on factory cost or cash cost of goods sold..

D. Material + D. Labour + D.Expenses + Factory OHD = Factory cost

and 

Factory cost + Administration OHD = Cash cost of goods sold

&

Cash cost of goods sold + selling OHD = cost of sales  and not cost of finished goods

I Agree wity Mr Kumar.

 

Thanks.

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