Chapter 18

Question	Answer
Specific identification method	This method calculates the cost of ending inventory by identifying each item remaining to invoice price, 478–479.
Weighted-average method	Calculates the cost of ending inventory by applying an average unit cost to items remaining in inventory for that period of time, 479–480, 482.
First-in, first-out (FIFO) method	This method assumes the first inventory brought into the store will be the first sold. Ending inventory is made up of goods most recently purchased, 480, 482.
Last-in, first-out (LIFO) method	This method assumes the last inventory brought into the store will be the first sold. Ending inventory is made up of the oldest goods purchased, 481–482.
Retail method	Method to estimate cost of ending inventory. The cost ratio times ending inventory at retail equals the ending cost of inventory, 483.
Gross profit method	Used to estimate value of inventory, 484.
Inventory turnover	Ratio that indicates how quickly inventory turns:
Average inventory	Total of all inventories divided by number of times inventory taken, 484.
Just-in-time (JIT) inventory system	System that eliminates inventories. Suppliers provide materials daily as manufacturing company needs them, 485.
Overhead expenses	Operating expenses not directly associated with a specific department or product, 216, 485.
Distribution of overhead	Companies distribute overhead by floor space or sales volume, 485–486.

Resource summary

	Created by McKenzie Layton over 1 year ago