- What is LIFO inventory method?
- Which inventory costing method assumes that items in ending inventory are the most recently acquired?
- Which inventory costing method assumes that cost of goods sold and ending inventory consist of a mixture of all the goods available for sale?
- What is included in the cost of merchandise inventory?
- What is the purpose of taking inventory?
- What are the 3 inventory accounts?
- How do you set maximum and minimum inventory levels?
LIFO stands for “Last-In, First-Out”. The LIFO method assumes that the most recent products added to a company’s inventory have been sold first. The costs paid for those recent products are the ones used in the calculation.
What is LIFO inventory method?
Last in, first out (LIFO) is a method used to account for inventory. Under LIFO, the costs of the most recent products purchased (or produced) are the first to be expensed. Other methods to account for inventory include first in, first out (FIFO) and the average cost method.
Which inventory costing method assumes that items in ending inventory are the most recently acquired?
LIFO
Which inventory costing method assumes that cost of goods sold and ending inventory consist of a mixture of all the goods available for sale?
average cost method
What is included in the cost of merchandise inventory?
Costs that are included in “merchandise inventory” include the cost of the product, transportation-in costs, packaging costs, transit insurance, etc. The cost of the items that have been sold are allocated to cost of goods sold (expense) and are shown on the income statement.
What is the purpose of taking inventory?
Businesses take inventory of items for sale for several reasons: For income tax reporting. Inventory is needed to calculate cost of goods sold on a business tax form. Inventory costs reduce business income and business taxes.
What are the 3 inventory accounts?
To record product costs as an asset, accountants use one of three inventory accounts: raw materials inventory, work-in-process inventory, or finished goods inventory. The account they use depends on the product’s level of completion.
How do you set maximum and minimum inventory levels?
Here it is:
- For forced-ordering and continuous review max-min systems, the formula is: Min stock level = lead time stock level + safety stock level.
- For a standard system, the formula would be: Min stock level = lead time stock level + safety stock level + review period stock level.