 Subject Advanced Cost& Management Accounting

 Topic Inventory Method

 Submitted to Prof. Usman Ghani
 Submitted by;

Sana

W2f17mcom0010

M.COM[s-3]
Introduction

Kellogg’s is one of the leading companies in providing food items (especially breakfast items
and convenience food) to its customers located worldwide. The company was established in
1906 in USA and till now, it’s been following the philosophy of ‘improved diet and improved
health’.

What inventory method does Kellogg use?

Kellogg’s uses FIFO costing method as they manufacturing just-in-time with their products
bound by expiration date.

Equivalent units

In cost accounting, equivalent units are the units in production multiplied by the percentage of
those units that are complete (100 percent) or those that are in process. That covers everything. If
a unit is completed and transferred out, it's 100 percent complete.
Spoilage.

Spoilage is waste or scrap arising from the production process.In accounting, normal spoilage
is included in the standard cost of goods, while abnormal spoilage is charged to expense as
incurred.

Value of normal spoilage

Work in process, beginning 18600

Started during current period 189,600

To account for 207,600

Spoiled units 12,600

Goods units completed and transferred out 170,000

Work in process, ending 25,000

Accounted for 207,600