Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Comm 217 > chapter 7: FIFO bhaye > Flashcards

chapter 7: FIFO bhaye Flashcards

1
Q

what can inventory be used for

A

to sell them to customers

to make other goods or services which are to be sold

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

what re merchandisers

A

people that purchase products, and resell them to their customers

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

merchandise inventory

A

goods or merchandise held for resale in the ordinary course of the business

these are usually acquired in finished condition

ready to sell without further processing

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

raw materials inventory

A

acquired by purchase

grown such as food products

extracted like natural resources to turn into finished goods

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

work in process inventory

A

goods in the process of being manufactured but not yet complete

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

finished goods inventory

A

manufactured goods that are complete and ready for sale

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

when recording costs when acquiring inventory, are sales returns and discounts subtracted?

A

ye boy

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

direct labor costs and factory overhead costs are part of what type of inventory costs?

A

inventory costs in the manufacturing environment

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

direct labor costs

A

earnings of employees who work directly on the products being manufactured

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

factory overhead costs

A

all manufacturing costs that are not raw material or direct labour costs

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

what is the calculation for the costs of goods available for sale

A

sum of costs of beginning inventory and costs to new inventory added

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

what is the cost of sales equation?

A

costs of Beginning Inventory + costs of new inventory (P) - Ending Inventory

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

what inventory systems can be used to determine the costs of sales of a period and the cost of ending inventory of a period?

A

the perpetual inventory system

periodic inventory system

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

perpetual inventory system

explain how it works

A

purchase transactions are directly recorded in an inventory account

when each sale is recorded, costs of sales must be recorded in the same time as well, while decreasing inventory

up to date record maintained on transaction-by-transaction basis

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

when is the perpetual inventory system usually necessary?

A

purchasing decisions

manufacturing decisions

distribution decisions

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

periodic inventory system

A

ending inventory and costs of sales are determined at the end of the period based on physical count

to find costs, we use the costs of sales equation

we look at the costs to get the different products remaining

inventory purchases are debited to a temporary account called purchases

revenues are recorded at the time of each sale

companies must estimate the value of inventory on hand

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

why did people even start using the periodic system?

A

before computers and shit, it was low cost

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

what are the disadvantages of the periodic system?

A

lack of timely inventory information

managers don’t know if there is too much or not enough

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

what. made the perpetual inventory system better

A

offers more timeliness

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

what does FOB destination point mean?

A

ownership of the product changes hands once it gets to the destination of the buyer

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

what does FOB shipping point mean?

A

ownership of the product changes hands once it ships from the seller’s location

22
Q

what are the three inventory costing methods

A
  1. specific identification
  2. FIFO
  3. Weighted average
23
Q

what is the specific identification method?

A

cost of each item sold is individually identified and recorded as cost of sales

24
Q

when is the specific identification method impractical?

A

when large quantities of similar items are kept in stock

25
Q

when is the specific identification method most useful?

A

when dealing with very expensive items

26
Q

how does the specifics identification method keep track of demand things?

A
  1. coding the purchase cost on each unit before placing it in stock
  2. keeping s separate record of the unit and identifying it with a serial number
27
Q

true or false

the choice of an inventory costing method is based not he physical flow of goods on and off the shelves?

A

naaah boy that be false

this is why the methods are called cost flow assumptions

28
Q

FIFO method

A

assumes the first units (first costs) are the first units sold

each purchase is added to stack of identical products in order of which was bought first

removed from stack in same sequence

29
Q

weighted average cost method

A

requires computation of the weighted-average unit cost of goods available for sale

you keep track every sale and purchase

once you sell something, the remaining inventory of that batch that you sold is added to more recent inventory (with different cost) and you average their costs together

30
Q

what is the difference in the statement of earnings between FIFO and weighted average?

A

when unit costs are rising, weighted average results in lower net earnings than FIFO

when unit costs are declining, weighted average results in higher net earnings than FIFO

31
Q

what is the difference in the inventory valuation fort the statement of financial position between FIFO and weighted average?

A

when unit costs are rising, weighted average results in lower inventory valuation than FIFO

when unit costs are declining, weighted average results in higher inventory valuation than FIFO

furthermore, weighted average presents a mix of different costs, which can result in an unrealistic inventory valuation

32
Q

can companies change inventory costing method juste de meme?

A

nah boy

only if it will make things clearer

33
Q

when prices rise, which inventory costing method would a company use between FIFO and weighted average when they consider income tax

A

weighted average since it produces lower earnings before income tax

34
Q

what can make the costs of inventories not be recoverable?

A

if the prices have declined

they have been damaged

have become obsolete

they will lose money in the end

35
Q

what is net realizable value?

A

expected sales price - estimated selling costs

it measures inventories at the lower of cost and net realizable value

36
Q

the lower of cost and net realizable value

A

valuation method departing from the cost principle

serves to recognize a loss when net realizable value of inventory drops below its cost

37
Q

when is the consideration of the lower of cost and net realizable value most important? for which type of companies?

A

high-technology companies

seasonal companies

38
Q

what are the effects of allowance for write downs of inventory to NRV on cost of sales, pretax earnings, and ending inventory on financial position at any period other than the period of sale?

A

costs of sale will increase

pretax earnings will decrease

ending inventory in statement of financial position will decrease

all by same amount

39
Q

what are the effects of allowance for write downs of inventory to NRV on cost of sales, pretax earnings, and ending inventory on financial position at period of sale?

A

costs of sale will decrease

pretax earnings will increase

these two by same amount

ending inventory in statement of financial position will be unaffected (still decreased from previous write off)

it will remain reduced like this all year long unless the value of inventory increases once more

40
Q

which are the most important inventory control features?

A
  1. separation of responsibilities for inventory accounting and physical handling of inventory
  2. storage of inventory in a manner that protects it from theft and damage
  3. limiting access to inventory to authorized employees
  4. maintaining perpetual inventory records
  5. comparing perpetual records to periodic physical accounts of inventory
41
Q

if inventory is overstated in one accounting period, what are the effects to costs of sales and beginning inventory of the current and next period?

A

cost of sales of current period would be understated

in the next period beginning inventory would be overstated by same amount and costs of sales at the end of the period would be also overstated by the same amount

42
Q

does an inventory overstatement affect net earnings after two or three periods?

A

nah boy

net earnings would stay the same as if it were fixed

43
Q

inventory turnover ratio

calculation and meaning

A

you want to find out how efficient inventory management is

cost of sales / average inventory

365 / inventory turnover ration

reflects how many times inventory was purchased and sold during the year

the higher the ratio, the gyuer it is because it means less cash is spent on inventory

if it declines, it might mean demand for the company’s products id declining

44
Q

true or false

inventory can be a major determinant of a company’s cash flows from operations?

A

true

45
Q

what is the effect of a write down of lower of cost or net realizable value on the Cost of sales (Not the same as total cost of items available for sale)

A

it will increase the cost of sales by the amount the rite down

46
Q

how do you find a write down

A

write down = total costs - LC and NRV valuation

47
Q

what happens to costs of sales and cost of ending inventory when the net realizable value of an item increase after a write down has been made

A

the difference between the increase in the value and the value after the write down is a reversal of that write down

costs of sales will be reduced by the difference

cost of ending inventory will increase by that same amount

48
Q

what would happen to the turnover ratio if inventory would to be deliver daily instead of weekly?

A

If parts inventory are delivered daily instead of weekly, then no need t0 stock large amounts of inventory

This reduces the average inventory and increases the turnover ratio

49
Q

what would happen to the turnover ratio if payment period was extended?

A

Extending the payment period would not affect the cost of sales, nor would such action affect the inventory levels

As a result, inventory turnover would not change

50
Q

what would happen to the turnover ratio if time to produce products would reduce?

A

finished products would be completed sooner and stocked in the warehouse

This will increase the average inventory

The cost of sales would not be affected by the shortened production process

Consequently, the turnover ratio is likely to decrease

51
Q

when the sale terms are FOB destination point, who pays for the shipping?

A

buyer

52
Q

when the sale terms are FOB shipping point, who pays for the shipping?

A

seller

Comm 217 (18 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions