Chapter 6 powerpoint Flashcards
Merchandiser inventory classication
merchandise inventory
Three manufacturer inventory classifications
Finished goods inventory
work in process
raw materials
finished goods inventory
maunfactured items that are completed and ready for sale
work in process
manufactured inventory items that are completed and ready for sale
Raw materials
The basic goods that will be used in production, but have not been placed into production
Just in time inventory (JIT)
Companies manufacture or purchase goods just in time for use
Two reasons to count physical inventory in a periodic system
To determine the inventory on hand at the balance sheet date
To determine the cost of goods sold for the period
Two steps in taking a physical inventory count
- Taking a physical inventory of goods on hand
- determining the ownership of goods
FOB shipping point
buyer pays freight costs
ownership goes to buyer once given to mail carrier
FOB destination
Seller pays freight costs
ownership goes to buyer when mail carrier drops off goods to buyer
Consigned goods
Goods of other parties that agree to be sold with a fee, but without taking ownership of goods
Inventory
assets that will be resold
Cost of inventory
all the costs incurred to build the inventory
eg. factory, machinery, labor
Inventory and COGS
all costs necessary to acquire the inventory
Costs related to the sale
Not required for inventory acquisition should be classified as selling expenses and NOT in inventory
ex. freight-out