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Pro’s and Con’s of the Four Costing Methods

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    Kelvin O.
    KE
    Kelvin O.

    four inventory costing methods:LIFO,FIFO,WEIGHTED AVERAGE,SPECIFIC IDENTIFICATION

    Ebrima J.
    MR
    Ebrima J.

    price variance.

    Sarah Phiri M.
    ZM
    Sarah Phiri M.

    Specific identification is the most straight forward and accurate way to value and appraise inventory but very cumbersome and unrealistic for a company that holds large stocks. lifo allows for big tax reductions because of its inflated cost of goods during periods of inflations and the downside is that it is not realistics because goods can become obsolete or damaged and may not fit well in other regions if they need to change location. Also its not so well received by the international accounting standards

    Ogunbowale A.
    MY
    Ogunbowale A.

    Pros Low Startup Costs - When you make your own products, you generally don’t have to produce a large upfront number of units like you would have to purchase if you were manufacturing. This allows you to enjoy relatively low production costs, which for many ecommerce businesses, make up the bulk of their startup costs. Brand Control - Making your own product means you can create any brand you wish with no limitations. Price Control - Going hand in hand with brand control is the ability to price your products as you see fit. Quality Control - When making your own products, you can closely control the quality of your products ensuring they live up to your expectations as well as your customers. Agility - Making your own products can give you the greatest level of agility for your business, allowing you to adjust quality, features and even the entire product on the fly. Cons High Time Input (Time Consuming) - Depending on your exact product choice, making your own products can be a time consuming process, leaving you less time to focus on actually building your business. Scalability - Making your products can become an issue when your business takes off. Although you have the option to look to a manufacturer for help as you scale up, this might not be easy or possible if your customers have come to expect your products to be handmade. Limited Product Choices - As mentioned prior, your choices of potential products are limited to your skills and the resources you have available to you. This will vary from person to person. Margins Margin potential is usually higher when making your product because you have more control over your costs as well as pricing. However, you should factor in your time to produce the goods, as this can cause a dramatic dip in your profit if your products are complex and time consuming to produce.

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