Inventory Methods

Question 1

Which inventory costing method would accompany use if it wishes to minimize profits in a period of rising prices?

Answer 1

LIFO

Results in the highest cost of good sold, and the lowest net income

Question 2

Which of the following is true regarding the retail inventory method?

Answer 2

The calculation of the cost–to–retail percentage is dependent on the cost flow method used

Question 3

Retail inventory method

Answer 3

Is the means of estimating ending inventory, while relying on the relationship between the cost of inventory and the sales price. Allows retailers to avoid the time and cost of taking physical inventory counts for interim reporting, however, it is not allowed at your end at which time and actual physical account is required.

Question 4

Consignment

Answer 4

The consignor ships merchandise to the consignee, who is an agent for the consigner and selling the goods
The goods are in the physical possession of the consignee, but remain the physical property of the consignor are included in the consignors inventory.
Cost incurred by the consigner on the transfer of goods to the consignee are in inventoriable

Question 5

Cost of goods available for sale

Answer 5

= cost of goods sold + ending inventory

Freight in and purchased discounts are not included in this equation

Question 6

Which method of inventory pricing best approximate specific identification of the actual flow of cost and units in most manufacturing situations?

Answer 6

First in first out

Most manufacturing operations process and sell inventory in the order it was received that is the first item in are the first item to be sold