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Technology Stocks : Advanced Micro Devices - Moderated (AMD)
AMD 215.32-0.2%Dec 30 3:59 PM EST
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To: combjelly who wrote (197456)5/18/2006 11:16:10 AM
From: grimesRead Replies (3) of 275872
 
CJ re: "Once packaged and tested, the value in inventory is whatever it will sell for, which for AMD averages somewhere around $95." I believe inventory is carried at lower of cost or realizable value - in particluar AMD's finished goodsinventory would be carried at fully burdened cost (that is would include variable manufacturing cost plus applied overheads.) Since these parts sell at very high margins (60 percent or thereabouts) the sales potential from finished goods inventory would be some multiple of its carrying value (i.e $ sales potential = $ finished goods inventory/(1 -(gross margin)/100). I believe finished goods inventory is carried at its expected selling price only if its expected selling price is less than it cost to produce it.

The carrying value of work in process inventory is the accumulated cost to get it to its current point of completion. For example cost of wafers in process would include the cost of the wafers plus materials used during the various stages of production that have been completed. I am not sure whether work in process inventory would include applied overheads, such as Fab depreciation, direct and indirect labor etc - i suspect these costs are not included until parts move from WIP to finished goods. However finished wafers (which are still WIP inventory) are almost certainly carried at a small fraction of the sales they will eventually produce since dicing, packaging, testing and possibly a fair bit of direct and indirect overhead are not yet applied. If the cost of a finished but undiced/untested wafer that comprise its WIP value is (say) $ 5,000 and it will eventually result in 200 processors that can be sold for $ 100 each then the revenue value of this wafer will be $ 50,000, or 10x its value as work in process inventory.

edit: I see Cravey managed to say the sam thing (I think) in about 10 words. Oh well.....
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