Raw materials – the materials bought by manufacturing organisations and used to manufacture the finished products.

Work-in-progress – the name given to partly-completed items in a manufacturing organisation.

Finished goods – the items that have been manufactured and are ready for sale.

First in first out (FIFO) – a method of inventory valuation that assumes that goods will be used up in order that they are acquired (for valuation purposed only). This means that the remaining balance will be valued based on the prices of more recent purchases.

Last in first out (LIFO) – this method of inventory valuation assumes that the most recently acquired inventory will be used first, leaving the earlier acquisitions to make up the value of the remaining balance. This does not have to correspond with the actual order of usage.

Average costs (AVCO) – this inventory valuation method involves calculating a new weighted average cost of goods each time that a new purchase is made, and using this valuation for subsequent issues and balances until further purchases are made.

Manufacturing account – this cost statement is produced at the end of a period to summarise costs under various categories.

Direct materials – this is calculated as the total of opening inventory of raw materials, plus materials purchased, minus closing inventory of raw materials.

Prime cost – the total of direct costs – in a manufacturing account it is calculated by adding direct materials used in manufacture to direct labour.

Factory (manufacturing) cost – a subtotal made up of the total if prime cost (direct materials and direct labour) and manufacturing overheads.

Factory cost of goods manufactured – the subtotal is the production costs of goods that have been completed and is made up of factory (manufacturing) cot adjusted for inventories of work-in-progress.

Cost of goods sold – a total based on the factory cost of goods manufactured which has been adjusted for inventories of finished goods.

	Created by tomfaulkner over 11 years ago

Accounts (Basic costing) Note on Basic Costing Chapter 3,4,5, created by tomfaulkner on 20/05/2013.