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Chapter 6 Accounting
Accounting
17
Accounting
Undergraduate 2
10/18/2012

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