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| Question | Answer |
| Average Inventory | Total of all inventories divided by number of times inventory taken. |
| Distribution of Overhead | Companies distribute overhead by floor space or sales volume. |
| 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. |
| GAAP | Accounting rules of standards set by a policy board to establish commonly accepted reporting of accounting information. |
| Gross Profit Method | Used to estimate value of inventory. |
| IFRS | Accounting rules or standards used internationally to establish commonly accepted reporting of accounting information. |
| Inventory Turnover | Ratio that indicates how quickly inventory turns: Cost of Goods Sold/Average Inventory at Cost. |
| Just-In-Time (JIT) Inventory System | System that eliminates inventories. Suppliers provide materials daily as manufacturing company needs them. |
| 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. |
| Overhead Expenses | Operating expenses not directly associated with a specific department or product. |
| Periodic Inventory System | Physical count of inventory taken at end of a time period. Inventory records are not continually updated. |
| Perpetual Inventory System | Inventory records are continually updated; opposite of periodic inventory system. |
| Retail Method | Method to estimate cost of ending inventory. The cost ratio times ending inventory at retail equals the ending cost of inventory. |
| Specific Identification Method | This method calculates the cost of ending inventory by identifying each item remaining to invoice price. |
| 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. |
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