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22 Cards in this Set
- Front
- Back
What is raw materials inventory? |
all the materials you've purchased for the product but have not yet been put in to production |
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What is work-in-process inventory? |
products that are still being build ("work in process" |
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What is included in the work-in-process inventory? |
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What is Just-in-Case inventory? |
inventory to account for unforseen problems |
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What is included in the inventory carrying cost? (3) |
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What is the difference between F.OB. shipping point and F.O.B destination? |
shipping point- the buyer is liable for the goods once they leave the seller
destination- the seller is responsible for the delivery of the goods until they reach the consumer |
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The cost associated with an inventory shortage is know as _________ ___________. |
Inventory shrinkage |
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If the physical inventory is greater than what is recorded on the books, the company makes an adjusting entry. What does that look like? |
Inventory Cost of Goods Sold
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What does the specific identification method do? |
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How do you calculate Average Unit Cost? |
Total Cost of Goods Available for Sale Total Units Available for Sale |
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Which inventory method produces the highest year-end value inventory? |
FIFO |
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What inventory method would be used by a company with a small volume of products with relatively high unit values? Such as airplanes, jewelry, and construction equipment. |
Specific Identification Method |
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What type of inventory method would you want to use if you had perishable items? |
FIFO method - because you want to sell your most perishable items first |
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Why might a company want to use the LIFO inventory method? |
the potential income tax savings associated with it's use |
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When should one use the Weighed Average Cost Method? |
When they have a warehouse with a large volume of goods |
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During times of rising inventory prices, which inventory method would you want to use because of the more favorable cash flow? |
LIFO
BUT: if the inventory prices are falling, you want to use FIFO |
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What is the LIFO conformity rule? |
says that any company that selects LIFO for income tax must also use LIFO for financial reporting to shareholders |
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Net realizable value is: |
the amount put on the books for how much you're going to get out of a product where you lose money
Exp: $300 camera can only be sold for $200 because it's damaged. There's also a $20 selling cost.
So the final amount you would journalize is $180 |
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What does inventory turnover indicate? |
how many times a year on average a firm sells its inventory |
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How do you calculate inventory turnover? |
Cost of Goods Sold Average inventory |
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How do you calculate the Day's sales in inventory? |
______365_________ Inventory Turnover |
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What does Days' sales in inventory calculate? |
How many days it takes on average for a firm to sell its inventory |