Tmq Importance Essay

1533 Words7 Pages
Cost Accounting and the Importance of TMQ include specific unit, weighted average, first-in first out (FIFO), and last-in first out (LIFO). Referring to the specific unit method, this gives value to a company's inventory based on its cost per unit. This inventory method makes sense for a company with higher priced inventory items, like car dealerships or fine jewelry stores. Weighted average can be calculated by dividing the cost of goods by the number of units available for sale within the company. Another method is first-in first out (FIFO). This method for valuing inventory is based on the order that merchandise comes in. The first goods in are the first is out for sale first and everything else afterwards must wait until product one is out of stock. Finally, last-in first out (LIFO) refers to the merchandise that is produced most recently/last is recorded as sold first. Last-in first out is usually known as inventory profit, and when prices are decreasing in the market the situation is reversed. Using either last-in first out (LIFO) or first-in first out has its benefits for both forms, last-in first out (LIFO) is able to match the current value because it is using the most recent cost of purchase, and it also provides the user with a lower income tax when prices within the market are rising. When looking at first-in first out (FIFO) you are reporting the most current costs on the balance sheet, and thus you are paying the lower tax payment when prices are decreasing. When the expense of overhead is discussed, it can become extremely difficult for a manager to classify; this is because all of the costs that go into running a business are placed under this topic. Many managers have found it easier to breakdown these overhead costs into production cost, selling cost or administrative cost. Another tough situation a manager may find himself in when dealing with
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