[Mahender Singh]

What is the process of valuation of Finished Goods in Balance Sheet by following method – FG valuation at least of the following – Cost or market value.

[ayush]

Hi Mahender,

1. Calculate the costs of materials for each finished product. This is simply what you paid for the raw materials that go into each product. You probably buy materials in bulk but figure what percentage of your bulk materials go into making one product. Multiply that percentage times the full cost of the raw materials, and you will get the dollar figure for materials in one product.
2. Figure your labor cost for one product. Measure the amount of time employees spend making each product, and determine what you paid in wages during that time. This is your labor cost for one product.
3. Estimate energy costs. Determine your product output per month, and divide your utililty bill for your manufacturing facility by that amount. This is how much energy expense you have for each product.
4. Calculate the cost for warehousing products. This is the total of wages paid for employees to stock finished products and keep track of them. Determine how much you paid to stock all finished products, and divide that amount by the number of products. This tells you the warehousing cost for one product.
5. Add costs for materials, manufacturing labor, energy and warehousing your finished product. This is the cost value of each finished product, and the figure you should enter as the value of finished products. You cannot use the market value of those products, only the cost.

Thanks
Ayush Bhardwaj

[Author]

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