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F&M chap 6
glossary terms
| Question | Answer |
|---|---|
| average inventory cost flow method | The method of inventory costing that is based on the assumption that costs should be charged against revenue by using the weighted average unit cost of the items sold. |
| consigned inventory | Merchandise that is shipped by manufacturers to retailers who act as the manufacturer’s selling agent. |
| Consignee | The name for the retailer in a consigned inventory arrangement. |
| Consignor | The name for the manufacturer in a consigned inventory arrangement. |
| first-in, first-out (FIFO) | The method of inventory costing based on the assumption that the costs of merchandise sold should be charged against revenue in the order in which the costs were incurred. |
| gross profit method | A method of estimating inventory cost that is based on the relationship of gross profit to sales. |
| inventory subsidiary ledger | A ledger containing individual accounts with a common characteristic. |
| inventory turnover | The relationship between the volume of goods sold and inventory, computed by dividing the cost of goods sold by the average inventory. |
| last-in, first-out (LIFO) | A method of inventory costing based on the assumption that the most recent merchandise inventory costs should be charged against revenue. |
| lower-of-cost-or-market (LCM) | A method of valuing inventory that reports the inventory at the lower of its cost or current market value (replacement cost). |
| net realizable value | The estimated selling price of an item of inventory less any direct costs of disposal, such as sales commissions. |
| number of days’ sales in inventory | The relationship between the volume of sales and inventory, computed by dividing the inventory at the end of the year by the average daily cost of goods sold. |
| physical inventory | A detailed listing of merchandise on hand. |
| purchase order | The purchase order authorizes the purchase of the inventory from an approved vendor. |
| receiving report | The form or electronic transmission used by the receiving personnel to indicate that materials have been received and inspected. |
| retail inventory method | A method of estimating inventory cost that is based on the relationship of gross profit to sales. |
| specific identification inventory cost flow method | Inventory method in which the unit sold is identified with a specific purchase. |
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