FAR 9 INVENTORY

Question 1

What is the weighted average cost of goods formula?

Answer 1

Beg cost + cost of purchases / beg units + purchased units

take that and multiply by units sold

Question 2

What is the new moving average unit cost?

Answer 2

Cost of the units purchased + cost of unis in inventory / new total number of units

Question 3

How do you find ending inventory using the weighted average cost of goods formula?

Answer 3

get the average cost per unit by

beg cost + cost of purchases / beg units + purchased units

take that and multiply by units remaining at the end of period

Question 4

What Method of inventory pricing best approximates specific identification of the actual flow of costs and units in most manufacturing situations?

Answer 4

FIFO

THEY SELL INVENTORY IN THE ORDER IT IS RECEIVED,

Question 5

These costs are examples of what?

Abnormal costs
Idle Factory Expense
Unallocated overhead
excessive spoilage
freight out

Answer 5

Excluded Inventory Costs

Question 6

What inventory method would be used in an inflationary environment where a company wants to retain the most cash?

Answer 6

LIFO

PRODUCES THE LOWEST NET INCOME AND THE LOWEST TAXABLE INCOME- MORE CASH RETAINED

Question 7

__________ Returns are included in the calculation of both cost and retail amounts of goods available for sale.

Answer 7

Purchase returns

Reduce net purchases at both because they represent amounts included in gross purchases that aren’t available.

Question 8

True or False?

Unless LIFO or the retail method is used, the lower of Cost of NRT rules apply (FIFO, AVERAGE COST)?

Answer 8

TRUE

Question 9

What method uses the company’s historical gross profit percentage (derived from prior periods’ financial data) to determine COGS and estimate ending inventory?

Answer 9

Gross Profit Method

Question 10

TRUE OR FALSE?

YOU can use replacement cost as market value when it is below the net realizable value and above the net realizable value less the normal profit margin?

Answer 10

TRUE

Question 11

TRUE OR FALSE?

To calculate Cost of goods manufactured you can subtract the beginning inventory from the ending inventory and then subtract that amount from the cost of sales that is given.

Answer 11

TRUE!

Cost of sales 120
beg inv 200
ending inv 180

= 200- 180 = 20 -120 = 100 cost of goods manufactured

Question 12

TRUE OR FALSE?

iF COMPANY USES THE NET METHOD TO ACCOUNT FOR INVENTORY PURCHASES. CASH DISCOUNTS WILL BE DEDUCTED FROM INVENTORY, WHETHER TAKEN OR NOT?

Answer 12

TRUE!!

GROSS METHOD RECORDS DISCOUNT ONLY WHEN TAKEN.

YOU EITHER USE NET OR GROSS

Question 13

What will the formula be if a company marks up their resale costs by 50%? IF I WANT THE ESTIMATED COST OF GOODS SOLD

Answer 13

1.00/1.50