Chapter 6 Flashcards
Cost of Goods Sold
the cost of the inventory that was sold
Merchandising Companies (Wholesalers)
serve as intermediaries in process of moving inventory from manufacturer to company to end user
Retailers
purchase inventory from manufacturers (wholesalers) and then sell goods to end user
Manufacturing Companies
manufacture the inventories they sell, rather than buying them in finished form from suppliers.
Raw Materials
cost of components that will be part of finished product
Work-in-Process
products that have been started, but not completed (raw materials, direct labor, and overhead costs)
Finished Goods
inventory complete in manufacturing process
Multi-Step Income Statement
income stmt that reports multiple levels of income (gross profit, operating income, income before taxes)
Gross Profit
net revenues - cost of goods sold
Operating Income
gross profit - operating expenses
Income Before Taxes
operating income + (nonoprating rev - nonoperating exp)
Inventory Cost Methods
specific identification
first in, first out (FIFO)
last in, first out (LIFO)
weighted-average cost
Specific Identification Method
matches each unit of inventory with its actual cost
First In, First Out Method
assumes the first units purchased are the first ones sold
Last In, First Out Method
assumes the last units purchased are the 1st ones sold
