BURNLEY 1e: Chapter 7 Review Flashcards
Consignee
An entity that sells goods on consignment on behalf of consignors, receiving a commission when the goods are sold.
Consignment
The selling of goods on behalf of another party, usually for a commission.
Consignor
The owner of goods sold on consignment by a consignee.
Cost formula
Method of allocating cost of goods available for sale to cost of goods sold and ending inventory.
Cost of goods available for sale (COGAS)
The cost of all of the goods that a company had available to sell to its customers during the period, calculated as the cost of the opening inventory plus the cost of purchases.
Cost-to-sales ratio
Ratio reflecting the normal markup that a company applies to its products, calculated as the product’s cost price divided by its marked-up selling price.
Days to sell inventory ratio
The number of days, on average, that it took a company to sell through its inventory, calculated as 365 days divided by the inventory turnover ratio.
Electronic data interchange (EDI)
A link between two companies with computers allowing inventory to be ordered directly over the computer connection.
Finished goods
Products completed by a manufacturer and ready for sale to customers.
First-in, first-out (FIFO)
The cost flow formula that assigns the cost of the first unit into the inventory to the first unit sold.
FOB destination
Shipping term signifying that the seller is responsible for paying shipping and any other costs incurred while the goods are in transit from the seller’s premises to the buyer’s premises.
FOB shipping point
Shipping term signifying that the buyer is responsible for paying shipping and any other costs incurred while the goods are in transit from the seller’s premises to the buyer’s premises.
Gross margin
Sales revenue minus cost of goods sold. Synonym for gross profit.
Gross margin estimation method
A method for estimating the cost of ending inventory by converting the sales amount to cost of goods sold using the gross margin ratio. The calculated cost of goods sold amount is subtracted from the goods available for sale to determine the ending inventory cost.
Homogeneous
Characteristic of inventory that is interchangeable (that is, where one unit of inventory cannot be distinguished from another), such as litres of fuel.
Inventory
Any item purchased by a company for resale to customers or to be used in the manufacture of a product that is then sold to customers.
Inventory shrinkage
The losses of inventory due to spoilage, damage, theft, or waste.
Inventory turnover ratio
A ratio that measures how fast inventory is sold and how long it is held before it is sold. It is calculated as cost of goods sold divided by average inventory.
Inventory writedown
The reduction of an inventory item’s carrying amount when its estimated net realizable value is less than its cost. A writedown is treated as an expense (part of cost of goods sold) in that period.
Just-in-time (JIT)
A delivery strategy where the inventory is delivered as close as possible to the time when the customer will be ready to buy it.
Manufacturer
A company that makes products.
Merchandiser
A company that purchases goods from manufacturers or suppliers and sells them to customers. Synonym for retailer.
Net realizable value (NRV)
The selling price of a unit of inventory less any costs necessary to complete and sell the unit.
Overhead
Manufacturing costs other than the costs of raw materials and labour, such as utilities and depreciation of the manufacturing facility.
Periodic inventory system
An inventory system in which cost of goods sold is determined by counting ending inventory, assigning costs to these units, and then subtracting the ending inventory value from cost of goods available for sale (that is, the sum of the beginning inventory plus purchases for the period).
Perpetual inventory system
An inventory system in which the cost of goods sold is determined at the time a unit is sold and ending inventory is always known, in both units and dollars.
Raw materials
All of the items required to manufacture a product.
Retailer
Synonym for merchandiser.
Specific identification (specific ID)
A cost formula of assigning costs to units of inventory in which the cost of a unit can be specifically identified from company records.
Stockout
A situation arising when a company sells all of a specific item of inventory and has no more available (in stock).
Weighted-average (W/A)
A cost formula for assigning costs to units of inventory in which each unit is assigned the weighted-average cost of the units available for sale at that point.
Work-in-process
A class of inventory used to record the costs of products that have been started but have not been completed at the end of the accounting period.
