Term
| What is the Specific-unit-cost/specific identification method? |
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Definition
| An inventory cost method based on the specific cost of particular units of inventory. This method is too expensive to use for inventory items that have common characteristics, such as bushels of wheat, gallons of paint, or automobile tires. |
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Term
| What is the Weighted-average method? |
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Definition
| It is an inventory costing method based on the weighted average cost of inventory during the period. Weighted-average cost is determined by dividing the cost of goods available for sales by the number of units available. It is also called the average-cost method. |
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Term
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Definition
FIFO (first-in, first-out) method is an inventory cost method by which the first costs into inventory are the first costs out to cost of goods sold. Ending inventory is based on the costs of the most recent purchases.
I(nflation) F(IFO) I(ncreases) I(ncome) |
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Term
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Definition
LIFO (last-in, first-out) is an inventory cost method by which the last costs into inventory are the first costs out to cost of goods sold. This method leaves the oldest costs- those of beginning inventory and the ending inventory.
I(nflation) L(IFO) L(essens) I(ncome) |
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Term
| What is the gross profit percentage? |
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Definition
The gross profit percentage is computed as gross profit divided by net sales revenue. The gross profit (or gross margin) percentage is a measure of profitability.
Companies strive to sell their inventory as quickly as possible because inventories generate no profit until they are sold. The faster the sales, the higher the company's income, and vice versa for slow-moving goods. Ideally, a business could operate with zero inventory, but most businesses must keep some goods on hand. |
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Term
| What is inventory turnover? |
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Definition
| Inventory turnover, the ratio of cost of goods sold to average inventory, indicates how rapidly inventory is sold. The inventory turnover statistic shows how many times the company sold (or turned over) its average level of inventory during the year. Inventory turnover varies from industry to industry. |
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