Flashcards in Introduction to Inventory Deck (20):
What is normally included in Inventory?
For a typical business entity this includes property held for resale, property in the process of production, and property consumed in the process of production
What does is included in the inventory of a manufacturing company?
1.) Finished goods inventory
3.) Raw Materials
What type of inventory do Merchandising companies typically hold?
Best described as property held for sale. Usually referred to as merchandise inventory
Can land be included in inventory?
Yes, if the firm is a real-estate development company
Can partially completed buildings and bridges be included in inventory?
Yes, if the firm is a construction company
Is inventory always a current asset?
Yes, always current even if they are noncurrent assets to the buyer
Are goods awaiting shipment usually included in inventory?
Not if the customer has paid for them.
What does FOB Destination (Free-on-board) when dealing with inventory mean?
Means that title to the goods transfer to the buyer when the goods reach the destination
What does FOB Shipping Point (Free-on-board) when dealing with inventory mean?
Means title passes at the shipping point (the selling company's warehouse)
Who owns the merchandise in a consignment arrangement?
the consignor. The merchandise is always included in the consignor's ending inventory even though it is not on their premises.
What does the acquisition cost of inventory include?
All costs incurred in getting the merchandise to the seller's premises and ready for sale. CAPITALIZE IN INVENTORY ALL COSTS NECESSARY TO BRING THE ITEM OF INVENTORY TO SALABLE CONDITION.
What costs are usually capitalized and included as part of inventory?
-Freight and Insurance in transit
-material handling cost
What elements affect fixed overhead rates?
Subject to estimation errors and affected by the choice of denominator measure and the budgeting horizon reflected in the denominator.
What merchandise is included in ending inventory?
All owned inventory, regardless of location.
Is fixed overhead one of the four manufacturing input costs?
Yes, this is one of the input costs.
What are the 4 manufacturing input costs?
1.) Fixed overhead rate
2.) Direct material
3.) Direct labor
4.) Variable overhead.
Is interest paid Included in Inventory costs?
No. Neither are promotional items such as advertising
Are Purchase discounts and returns and allowances capitalized into the cost of Inventory?
Yes, reduce the cost allocated to Inventory
If a cosginee pays shipping costs, what account is this placed in until the cosignee pays the cosignor?