Chapter 6 Flashcards
What is consigned inventory?
Merchandise that is shipped by manufacturers to retailers who act as the manufacturer’s selling agent.
Who is the consignee in a consigned inventory arrangement?
The retailer in a consigned inventory arrangement.
Who is the consignor in a consigned inventory arrangement?
The manufacturer in a consigned inventory arrangement.
What is days’ sales in inventory?
The measure of the length of time it takes to acquire, sell, and replace inventory, computed by dividing the average inventory by the average daily cost of goods sold.
What is the first-in, first-out (FIFO) inventory cost flow method?
The method of inventory costing based on the assumption that the first units purchased are the first units sold.
What is the gross profit method?
A method of estimating inventory cost that is based on the relationship of gross profit to sales.
What is inventory turnover?
A measure of the number of times inventory is turned into goods sold during the year, computed by dividing the cost of goods sold by the average inventory.
What is the last-in, first-out (LIFO) inventory cost flow method?
A method of inventory costing based on the assumption that the last units purchased are assumed to be sold and the ending inventory is made up of the first purchases.
What is the lower-of-cost-or-market (LCM) method?
A method of valuing inventory that reports the inventory at the lower of its cost or current market value (net realizable value).
What is net realizable value?
The estimated selling price of an item of inventory less any direct costs of disposal, such as sales commissions.
What is physical inventory?
A detailed listing of merchandise on hand.
What is a purchase order?
The document authorizing the purchase of the inventory from an approved vendor.
What is a receiving report?
The document used by the receiving personnel to indicate that materials have been received and inspected.
What is the retail inventory method?
A method of estimating inventory cost that is based on the relationship of cost to retail price.
What is the specific identification inventory cost flow method?
The method of inventory costing in which a unit sold is identified with a specific purchase.
