An inventory costing method that uses the weighted average unit cost to allocate the cost of goods available for sale to ending inventory and cost of goods sold
Goods held for sale by one party although ownership of the goods is retained by another party
Current replacement cost
The cost of purchasing the same goods at the present time from the usual suppliers in the usual quantities
Days in inventory
Measure of the average number of days inventory is held; calculated as 365 divided by inventory turnover ratio
Finished goods inventory
Manufactured items that are completed and ready for sale
First-in, first-out (FIFO) method
An inventory costing method that assumes that the earliest goods purchased are the first to be sold
Freight terms indicating that ownership of goods remains with the seller until the goods reach the buyer
FOB shipping point
Freight terms indicating that ownership of goods passes to they buyer when the public carrier accepts the goods from the seller.
Inventory turnover ratio
A ration that measures the liquidity of inventory by measuring the number of times average inventory sold during the period; computed by dividing cost of goods sold by the average inventory during the period.
Just-in-time (JIT) inventory
Inventory system in which companies manufacture or purchase goods just in time for use
Last-in, first-out (LIFO) method
An inventory costing method that assumes that the latest units purchased are the first to be sold
For a company using LIFO, the difference between inventory reported using LIFO and inventory using FIFO
A basis wherby inventory is stated at the lower of either its cost or its market value as determined by current replacement cost
Basic goods that will be used in production but have not yet been placed in production
Specific identification method
An actual physical flow costing method in which items sold and items still in inventory are specifically costed to arrive at cost of goods sold and ending inventory
Weighted average unit cost
Average cost that is weighted by the number of units purchased at each unit cost
Work in progress
That portion of manufactured inventory that has begun the production process but is not yet complete.
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