Question

1. What are the primary goals of inventory managers?

2. Inventory means goods held for sale in the normal course of business or used to produce goods for sale. Define the following:

Merchandise Inventory -

Finished goods inventory -

Consignment inventory -

3. How is inventory categorized on the balance sheet and why?

4. What is the value of the inventory recorded on the balance sheet?

5. When a company sells inventory what is the JE that must be recorded?

6. What is the cost of goods sold (COGS) equation?   Solve for the cost of goods sold based on the following information: Beginning inventory = $50,500, Purchases = $700,000, Ending inventory = $ 75,000.

7. Calculate COGS and ending inventory for a perpetual inventory system using the following detail:

Date	Description	Units	Unit Cost	Total Cost
Feb 2	Beginning Bal	200	$3	$ 600
Feb 4	Purchase	100	$5	500
Feb 7	Purchase	300	$4	1,200
Feb 8	Sale	500
Feb 10	Purchase	300	$5	1,500
Feb 12	Sale	300
Feb 15	Purchase	1,000	$2	2,000
Feb 20	Sale	500
Feb 28	Purchase	1,000	$3	3,000

            FIFO:

LIFO:

              Weighted Average:

             

8. Which inventory costing method results in the most net income and why?

9. Which inventory costing method results in the lowest ending inventory balance and why?

10. How is the inventory turnover ratio calculated, describing the purpose of this ratio and what result of this calculation indicates to management.

Answer 1

Ans:-

1- Primary goals of inventory managers:-

Primary goal of Inventory manager is maintaining and organising optimum stock for meeting demand and

incurring minimum cost in inventory management.

2-

Merchandise Inventory -

It is inventory of goods purchased in completed form and ready for sale or use as consumable.

Finished goods inventory:-

It is inventory of completed goods for sale. It is manufactured from raw material and ready for sale.

It includes cost of raw material and processing cost like overheads, labour cost.

Consignment inventory:-

It is inventory of goods held by consignee on behalf of consignor for distribution/ supplies.

in this case risk and reward is not transferred and payment is done when goods sold or consumed.

3. Inventory is caterorised as current assets as it will realize money within one year when they are sold.

4. Value of Inventory is cost or market value whichever is lower.