Moreover, due to the recent technological changes there have been issues with respect to the cost of the product. Thus, …show more content…
They can be implemented as per the wish of the company. However, the one thing the organization should keep in mind is that they should be consistent while using the different methods of valuation. The valuation methods should not change each and every year. Moreover, if there is a change the change should be carefully administered. All the changes in valuation should be carefully credited or debited to proper valuation accounts. Moreover, even when the company applies the valuation method of lower of cost price or market value then all these prices should also be calculated very judiciously. The prices should not be arbitrarily chosen but it should be calculated in a proper manner. For example, the cost price of the product should include all costs that are directly included in the production of the product. All the indirect costs that are also incurred in order to ensure that the products are in a saleable condition should also be included in the cost price of the product. For the market price, the organization should not consider the market price of the place where it has a huge demand or the place where it has a sluggish demand. It should take an average of all these prices. This will ensure that they are able to value the cost and the market prices at the correct …show more content…
Inventory is valued as a collection of products and never on individual basis. So, even in this scenario all the products in the particular product line should be valued at the lower of cost or market prices. Thus, this method should not be implemented on the basis of individual products but all the product lines should be valued on this basis. If this method is implemented on the entire product then indirectly it also falls on all the products. Thus, this helps to ensure that the method of inventory valuation followed is implemented also in the correct and the required manner. Moreover, taking such an approach helps the organization to know what the value of their products in different markets is. Once they aware of the values then they can also redefine their strategies. For example, if they are doing well in a particular phase then they will ensure that they keep up the standards in that market. However, if they are not doing well in any particular market then they will be making strategies and plans to ensure that their market standing also increases in that particular