I am a complete beginner doing end of first year accounts, sometimes my very small company buys things, then takes those apart and sell them separately. In these cases I have the purchase cost for one item, but then how do I calculate the cost of one of its parts?
For example I buy item X for the cost of 100, which is then dismantled to 5 different pieces (X1...X5) and I've sold X1 and X2 for 50 and 100, and I still have X3, X4, X5 in stock, how do I value X3-X5 when doing the closing stock valuation?
Is there any rule for this, or is it entirely up to me as far as it is not very far from reality, so I could just say, that X3 does worth 10%, X4 25%, X5 15% of the original item, so their closing stock value will be 10, 25, and 15?
Stock should be valued at the LOWER of cost, or net realisable value (how much you can sell it for)
Cost is going to be the cost of the whole item. You could then look at the individual selling prices for the parts, and apply these proportions to the cost, giving you the cost of each component.
You would only need to do this once for each model and then you would have a 'standard' cost for each part.
You obviously would have to take account of obsolete, damaged parts etc.
The only problem is that the items and parts are basically unique and they do not have a set price in the market, so sometimes an item does not sell at all for the price I initially thought it would sell, so I have to lower the price after a few months...
It is impossible to accurately know in advance how much the parts will be sold for, so I am not able to find out the exact proportions in advance.
Is it a problem if I calculate with these estimated proportions? (which will be quite close to the real proportions in the end)
