Importance of Cost Method selection and use

It is very critical to determine the cost method to be used in your organization. Once you start transacting and valuating the same,  and if you find any limitations in the cost method for any reasons. You may feel like changing the cost method.

It is however not possible to change the cost method once the inventory of the item is used in the organization. To elaborate, if you perform any transaction like purchasing the item, issuing the material and converting them to a manufactured item, capture the customer order and ship the items, move the items from one location to other, and even inter-company movements all of them are one or other ways of using inventory and the inventory is said to be transacted. In each of the transactions there will be computations and postings of costs in financial accounts. Any attempt to