I have been asked to solve a problem for someone and I need some advice. The problem is with cattle inventory and how to make it a perpetual inventory. The challenge is to make sure all the costs get into the system correctly to ensure proper selling margins.

Our current inventory system allows us to compute the actual price per lb that includes the in bound trucking and buyers commissions. At month end we take the ending inventory and compute cost of sales in the traditional format of Beginning inventory + Purchases – Ending Inventory = Cost of sales. Our beginning and ending inventory includes the commissions and transportation costs associated with unsold inventory so that we have an inventory that includes all necessary components. Since we expense in bound trucking and commissions on the P & L we have to include these in ending cattle inventory for matching purposes.

My goal is to develop a method of costing that will allow us to expense the cattle as we sell them thus turning our inventory into a perpetual system and allowing us to be proactive versus reactive in reviewing profit and loss on deals. In order to do this we must develop a method of dealing with trucking and commissions inventory in a perpetual fashion.

Please let me know any suggestions you may have.
Thanks