Chapter 6 - Reporting & Analyzing Inventory

Front 1

Average Cost Method:

Back 1

An inventory costing method that uses the weighted average unit cost to allocate the cost of goods available for sale to ending inventory and cost of goods sold.

Front 2

Consigned Goods:

Back 2

Goods held for sale by one party (the consignee) although ownership of the goods is retained by another party (the consignor.)

Front 3

Current Replacement Cost:

Back 3

The current cost to replace an inventory item.

Front 4

Days in Inventory:

Back 4

Measure of the average number of days inventory is held; calculated as 365 divided by inventory turnover ratio.

Front 5

Finished Goods Inventory:

Back 5

Manufactured items that are completed and ready for sale.

Front 6

First-in, First-out (FIFO) method:

Back 6

Freight terms indicating that the goods are placed free on board (FOB) at eh buyer's place of business, and the seller pays the freight cost; goods belong to the seller while in transit.

Front 7

FOB Shipping Point:

Back 7

Freight terms indicating that the goods are placed free on board (FOB) the carrier by the seller, and the buyer pays the freight cost; goods belong to the buyer while in transit.

Front 8

Inventory Turnover Ratio:

Back 8

A ratio that measures the number of times on average the inventory sold during the period; computed by dividing cost of goods sold by the average inventory during the period.

Front 9

Last-in, First-out (LIFO) method:

Back 9

An inventory costing method that assumes that the costs of the latest units purchased are the first to be allocated to cost of goods sold.

Front 10

LIFO reserve:

Back 10

For a company using LIFO, the difference between inventory reported using LIFO and inventory using FIFO.

Front 11

Lower of cost or market (LCM) basis:

Back 11

(inventories) A basis whereby inventory is stated at the lower of cost or market (current replacement cost.)

Front 12

Raw Materials:

Back 12

Basic goods that will be used in production but have not yet been placed in production.

Front 13

Specific identification method:

Back 13

An actual physical flow costing method in which items still in inventory are specifically costed to arrive at the total cost of ending inventory.

Front 14

Weighted Average Unit Cost:

Back 14

Average cost that is weighted by the number of units purchased at each unit cost.

Front 15

Work In Process:

Back 15

That portion of manufactured inventory that has begun the production process but is not yet complete.