F3-M3 Inventory Flashcards
What expenses are considered COGS?
Raw materials, direct labor costs, factory overhead.
Under FIFO
Perpetual and periodic is the same
Under LIFO
Perpetual and periodic is NOT the same
How is freight considered when including inventory on the bal sheet?
It is added to the bal sheet
How do you report inventory at lower cost of market?
NRV (-) market floor. (Market floor) = sales value times profit margin) If question is asking for lower cost or NRV. Use the lower of these two methods
What is NRV of inventory
selling price minus the cost to complete
When calculating ending inventory, sales does not mean an outflow of inventory. How do we get the outflow of inventory?
By finding the COGS which could be a markup of inventory. Sales divided by markup is the COGS. If mark up is 20 percent than the formula would be sales (/) 1.20= COGS
What is the weighted cost average of COGS
Total cost/ total units = per unit.
Per unit (X) units sold.
How do you calc COGS using FIFO/LIFO
Take the inventory sold using FIFO or LIFO at units times price.
Which inventory method will produce a lower turnover ratio?
FIFO
How do you calc the dollar value of Periodic
Ending inventory in units (X) oldest cost
What happens when current purchase price of a contract has lost value
Loss must be recognized at the time of the decline is purchase as a liability on the bal sheet
What is LIFOs best reason for accurate measurement of inventory
Price index used is greater than 1,it adjusts for price level changes, usually has a dollar value LIFO.
What does lower of cost or NRV mean?
It represents finding the lower of original cost or NRV. If NRV exceeds orignal loss than the amount should be reported at cost.
Index for Dollar value LIFO formula
Ending inventory at CY (/) Ending Inventory at base year cost
