Professional Documents
Culture Documents
Inventories and Cost of Sales
Inventories and Cost of Sales
Responsiveness Efficiency
Responsiveness Efficiency
Responsiveness Efficiency
Responsiveness Efficiency
Types of Inventories?
Competitive Strategy
Responsiveness Efficiency
Inventory Management
Corporate Strategy
Competitive Strategy
Inventory
Competitive Strategy
Responsiveness Efficiency
Faciliti es Inventor
y Transportatio Informatio
n Sour
n cing Pricing
C1
C1
GOODS IN TRANSIT
FOB Shipping Point
Public
Carrier
Seller Buyer
Ownership passes
to the buyer here.
Public
Carrier
C1
GOODS ON CONSIGNMENT
Merchandise is included in the inventory of the
consignor, the owner of the inventory.
Thanks for selling my
inventory in your
store.
Consignee
Consignor
6 - 12
C1
C2
Minus
Minus
Discounts
Discounts Invoice Plus
Plus
Insurance
Insurance
and
and
Allowances
Allowances
Cost
Plus
Plus Import
Import Plus
Plus
Duties
Duties Plus
Plus Storage
Storage
Freight
Freight
6 - 14
C2
INTERNAL CONTROLS AND TAKING A
PHYSICAL COUNT
Most companies take a When the physical count
physical count of does not match the
inventory at least once Merchandise Inventory
each year. account, an adjustment
must be made.
The matching
principle requires
matching costs
with sales.
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P1
P1
SPECIFIC IDENTIFICATION
6 - 20
P1 SPECIFIC IDENTIFICATION
Income
Income Statement
Statement
Cost
Cost of
of Goods
Goods Sold
Sold Balance
Balance Sheet
Sheet Inventory
Inventory
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P1
SPECIFIC IDENTIFICATION
Here are the entries to record the purchases and sales. The
numbers in red are determined by the cost flow assumption used.
P1
Oldest Cost of
Costs Goods Sold
Recent Ending
Costs Inventory
6 - 23
P1
P1
P1
P1
Recent Cost of
Costs Goods Sold
Oldest Ending
Costs Inventory
6 - 27
P1
P1
P1
P1
WEIGHTED AVERAGE
When a unit is sold, the average
cost of each unit in inventory is
assigned to cost of goods sold.
Cost of Goods Units on hand
Available for ÷ on the date of
Sale sale
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P1
WEIGHTED AVERAGE
6 - 32
P1
WEIGHTED AVERAGE
6 - 33
P1
WEIGHTED AVERAGE
6 - 34
P1
WEIGHTED AVERAGE
Here are the entries to record the purchases and sales entries for Trekking.
The numbers in red are determined by the cost flow assumption used.
P2
P2
P2
LCM Applied
to
Units on Total
Inventory Items Hand Total Cost Market Items
Cycles:
Roadster 20 $ 160,000 $ 140,000 $ 140,000
Sprint 10 50,000 60,000 50,000
Off-Road
Trax-4 8 $ 40,000 $ 52,000 40,000
Blazer 5 45,000 35,000 35,000
Totals $ 295,000 $ 265,000
6 - 42
A3
INVENTORY TURNOVER
Shows how many times a company turns over its inventory
during a period. Indicator of how well management is
controlling the amount of inventory available.
Average
Inventory = (Beg. Inv. + End Inv.) ÷ 2
6 - 45
A3
GLOBAL VIEW
Items and Costs Making Up Inventory
Both U.S. GAAP and IFRS include in inventory all items that a company owns
and holds for sale and include in the cost expenditures necessary to bring
those items to a salable condition and location.
P4 APPENDIX 6B:
INVENTORY ESTIMATION METHODS
Inventory sometimes requires estimation for interim statements or
if some casualty such as fire or flood makes taking a physical
count impossible.