Chapter 6 Formulas Flashcards Preview

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Flashcards in Chapter 6 Formulas Deck (12)
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1
Q

Inventory Turnover Ratio

A

COGS/ Average Inventory

2
Q

Days Sales in Inventory Ratio

A

365/ Inventory Turnover Ratio

3
Q

Ending Inventory and COGS are reported as______?

A

Ending Inventory = Current Asset on Balance Sheet @ lower cost and net realizable value

COGS = Expense on income statement

4
Q

Difference between Merchandiser/ Manufacturer?

A
Merchandiser = Buy's its inventory 
Manufacturer = Produces it's inventory
5
Q

In a period of rising prices____

A

FIFO produces higher profit
Weighted Average produces lower profit

(lower units will be included in COGS)

6
Q

In a period of falling prices ____

A

Weighted Average produces higher profit

FIFO produces lower profit

7
Q

In a period of stable prices_____

A

FIFO and Weighted Average will produce the same results

8
Q

Cost Flow Relationship

A

Beginning Inventory + Cost of Goods Purchased = Cost of Goods Available for Sale - COGS = Ending Inventory

9
Q

When is Specific Identification Used?

A

used for goods that are not ordinarily interchangeable

10
Q

When is FIFO Used?

A

assumes a first‐in, first‐out cost flow for sales.

Cost of goods sold consists of the cost of the earliest goods purchased.

Ending inventory is determined by allocating the cost of the most recent purchases to the units on hand.

11
Q

When is Weighted Average Used?

A

used for goods that are homogeneous or non‐distinguishable.

12
Q

Consignee vs Consignor

A
Consignee = Doesn't Count as Inventory
Consignor = Counts as Inventory