Flashcards
Key Terms Chapter 18: Inventory and Overhead
Cards in this deck (13)
- 1Average inventoryTotal of all inventories divided by number of times inventory taken.
- 2Distribution of overheadCompanies distribute overhead by floor space or sales volume.
- 3First-in, first-out (FIFO) methodThis method assumes the first inventory brought into the store will be the first sold. Ending inventory is made up of goods most recently purchased.
- 4Gross profit methodUsed to estimate value of inventory.
- 5Inventory turnoverRatio that indicates how quickly inventory turns.
- 6Just-in-time (JIT) inventory systemSystem that eliminates inventories. Suppliers provide materials daily as manufacturing company needs them.
- 7Last-in, first-out (LIFO) methodThis method assumes the last inventory brought into the store will be the first sold. Ending inventory is made up of the oldest goods purchased.
- 8Overhead expensesOperating expenses not directly associated with a specific department or product.
- 9Periodic inventory systemPhysical count of inventory taken at end of a time period. Inventory records are not continually updated.
- 10Perpetual inventory systemInventory records are continually updated; opposite of periodic inventory system.
- 11Retail methodMethod to estimate cost of ending inventory. The cost ratio times ending inventory at retail equals the ending cost of inventory.
- 12Specific identification methodThis method calculates the cost of ending inventory by identifying each item remaining to invoice price.
- 13Weighted-average methodCalculates the cost of ending inventory by applying an average unit cost to items remaining in inventory for that period of time.