Chapter 6 Flashcards
Merchandising
Inventory is many different items
- owned by company
- in a form ready for sale
Manufacturing
Some inventory may NOT be ready for sale
Finished goods inventory
Manufactured item that is completed and ready for sale
Work in progress
That portion of manufactured inventory that has begun the production process but is not yet complete
Raw materials
Basic goods that will be used in future production
Just-In-Time (JIT)
Companies manufacture/purchase goods just in time for use
Determining inventory quantities
- Check accuracy of inventory records
2. determine amount of inventory lost due to wasted raw materials (shop lifting)
Goods in transit
Company may have purchased goods that have not yet been received or sold goods that have not yet been delivered
FOB shipping
Ownership passes to buyer when PUBLIC CARRIER ACCEPTS GOODS from seller
FOB destination
Ownership remains with seller until GOOD REACHES THE BUYER
Consigned goods
holds good from other parties and try to sell the good fora fee (Dealer would not take ownership)
Specific identification method
Finds ending inventory cost
ex: purchase TV $700 and $800 ending inventory is $750 (700 and 800 TV got sold….750 tv is left)
Cost flow assumptions
assumptions on which units were sold
Cost of goods sold formula
(beginning inventory + purchases) - ending inventory
FIFO (first in, first out)
earliest goods purchased are first to be sold
cost of earliest goods purchased are first to be recognized
unit cost of most recent purchase and working backward until all units of inventory have been costed
