Inventory Cost & Specific Identification Method: Learning Journal

This learning journal entry reflects on the understanding of inventory cost, encompassing holding and storing costs relevant for sales evaluation. It categorizes costs into ordering, carrying, and stock-out costs, crucial for inventory management. The journal also covers the Specific Identification method for determining ending inventory cost, referencing Saudi Arabia's inventory valuation at net realizable value or lower cost. Finished goods costing is based on weighted average (materials, overheads, labor), while other inventories use moving average. Provisioning for obsolete or slow-moving items is also mentioned. The reflection concludes that merchants can utilize the specific identification method for tracking costing events based on inventory movements, aiding in informed business decisions regarding holding and placing costs, ultimately aiming for an economic order quantity by balancing ordering and carrying costs.

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LEARNING JOURNAL ASSIGNMENT
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Table of Contents
Inventory Cost and its Method...................................................................................................2
Bibliography...............................................................................................................................3

2LEARNING JOURNAL ASSIGNMENT
Inventory Cost and its Method
I have learned during the week session that Inventory cost is concerned with all those
cost that includes cost that is related to holding and storing of the inventories for the purpose
of sale. This cost is helpful for the management in order to evaluate and check the level of
inventory to keep. It is categorized in three parts that is costs of ordering, costs of carrying
and stock out cost. Ordering cost is concerned with cost associated with the procurement of
assets. Carrying cost is the cost associated with holding the inventories and stock out cost is
concerned with replenishment of the inventories.
In addition to the concept of inventory cost, I have also learned that Specific
Identification method is used in order to find out the ending inventory cost. In Saudi Arabia,
the inventories are stated at net realizable value or lower of the cost. For the finished goods,
cost is determined based on weighted average, which includes material’s cost, direct
overheads and labor. Moreover, other inventories are stated and valued based on moving
average. However, for obsolete or slow moving items, provision is established.
Hence, it can be concluded from learning during the week session that Merchants can
use the specific identification method in order to track the events as and when required for
recording of the costing purposes based on the movements of the inventory. Proper
management of the inventory can help the Merchant for taking important business decisions
for balancing the holding cost and placing cost of inventory replenishment orders. Therefore,
balance of ordering and carrying cost will minimize inventory cost that leads to economic
order quantity.

3LEARNING JOURNAL ASSIGNMENT
Bibliography
Rehman, S., & M. Al-Hadhrami, L. (2014). Web-based national corrosion cost inventory
system for Saudi Arabia. Anti-Corrosion Methods and Materials, 61(2), 72-92.