Deck 18: Inventory and Overhead

Question 1

The specific identification method is able to identify in the ending inventory the actual invoice cost associated with it.

Answer 1

True

Question 2

A company can change from LIFO to FIFO without notifying the Internal Revenue Service.

Answer 2

False

Question 3

A periodic inventory system requires a physical count of its inventory once a month.

Answer 3

False

Question 4

In FIFO, the most recent cost is assigned to the inventory sold.

Question 5

The cost ratio times ending inventory at cost equals ending inventory at retail.

Question 6

The cost flow tends to follow the physical flow when FIFO is used.

Question 7

Inventory value means the flow of costs does not always match the flow of goods.

Question 8

Cost of goods sold equals cost of goods available for sale plus cost of ending inventory.

Question 9

To use the retail method of estimating ending inventory, the figure for net sales at retail must be known.

Question 10

In the specific identification method, the total cost of ending inventory is equal to the number of units not sold times the actual cost per unit.

Question 11

The gross profit method is a way to estimate the cost of ending inventory without a physical count.

Question 12

A perpetual inventory system continually updates inventory records.

Question 13

A cost ratio of $.68 means that for each $1 of retail inventory it costs the store $.68.

Question 14

Under certain circumstances, ending inventory could be valued at less than cost.

Question 15

Weighted-average unit cost is total cost of goods available for sale divided by beginning number of units available for sale.

Question 16

The specific identification method might be used by companies with high-cost items.

Question 17

LIFO doesn't always match the physical flow of goods but still can be used to calculate the flow of costs.

Question 18

In the specific identification method, the flow of goods and the flow of costs are not the same.

Question 19

Companies with homogeneous products might use the weighted-average method.

Question 20

During inflation, LIFO produces the highest possible income for a company.

Question 21

Overhead expenses are:

A) Directly related to a specific department
B) Directly related to a specific product
C) Contributing directly to the running of a business
D) Contributing indirectly to the running of a business
E) None of these

Question 22

Perpetual inventory does not have this characteristic:

A) High price, limited inventory
B) Verified at some point by a physical count
C) Low price, large inventory
D) Utilizes scanners, computers, etc.
E) None of these

Question 23

Overhead expense can be allocated to particular departments.

Question 24

Overhead expenses are allocated to particular departments:

A) Strictly on floor space
B) Strictly on sales volume
C) Based on a ratio of space to sales volume
D) By floor space or sales volume
E) None of these

Question 25

With net sales of $40,000, beginning inventory at retail of $14,000, ending inventory at retail of $20,000, and cost of goods sold of $19,500, the inventory turnover at retail is (to the nearest hundredth):

A) 5.15
B) 3.25
C) 2.35
D) 5.23
E) None of these

Question 26

The cost ratio in the retail method is found by the cost of goods available for sale at cost divided by:

A) Net sales
B) Ending inventory at retail
C) Cost of goods available for sale at retail
D) Net purchases at cost
E) None of these

Question 27

Cost of goods sold is equal to cost of goods available for sale:

A) Plus cost of ending inventory
B) Minus cost of ending inventory
C) Divided by cost of ending inventory
D) Multiplied by cost of ending inventory
E) None of these

Question 28

During inflation, the best method to use in inventory valuation that produces the smallest amount of profit is:

A) LIFO
B) FIFO
C) Specific invoice
D) Weighted average
E) None of these

Question 29

All but which one of the following is information needed to calculate inventory valuation by the retail method?

A) Beginning inventory at cost and retail
B) Cost of net purchases at cost and retail
C) Net sales at cost
D) Net sales at retail
E) None of these

Question 30

Compared with cost due to theft, spoilage, etc., inventory turnover at retail is usually:

A) Higher
B) Much higher
C) Lower
D) Much lower
E) None of these

Question 31

With beginning inventory at cost of $9,000, ending inventory at cost of $7,000, net sales of $51,000, and cost of goods sold of $46,000, the inventory turnover at cost to the nearest hundredth is:

A) 5.75
B) 7.55
C) 5.57
D) 7.57
E) None of these

Question 32

In the retail method the ending inventory at cost is calculated by multiplying the cost ratio times:

A) Beginning inventory at retail
B) Ending inventory at retail
C) Cost of goods available for sale
D) Net sales for the month
E) None of these

Question 33

The weighted-average method is best used:

A) For heterogeneous product
B) For homogeneous products
C) Only for grains
D) Only for fuels
E) None of these

Question 34

Given the following: FIFO method: 16 units left in inventory
The cost of goods sold is:

A) $5,000
B) $10,000
C) $4,965
D) $5,225
E) None of these

Question 35

FIFO assumes all but one of the following:

A) Sell the old inventory first
B) Recent cost assigned to inventory not sold
C) Sell the new inventory first
D) Cost flow tends to follow physical flow
E) None of these

Question 36

Belle Co. has beginning inventory of 12 sets of paints at a cost of $1.50 each. During the year, the store purchased 7 at $3.00, 8 at $3.25, and 12 at $3.50. By the end of the year 31 sets were sold. Using the LIFO method, the cost of ending inventory is:

A) $28.00
B) $12.00
C) $21.00
D) $3.50
E) None of these

Question 37

Inventory turnover at retail is equal to net sales divided by:

A) Beginning inventory at retail
B) Average inventory at retail
C) Beginning inventory at cost
D) Average inventory at cost
E) None of these

Question 38

The retail method:

A) Is not an estimate
B) Does not require a cost ratio
C) Eliminates any need ever to take a physical inventory
D) Aids a company in not having to calculate an inventory cost for each individual item
E) None of these

Question 39

In specific identification, which one is not true?

A) The specific purchase invoice prices are used
B) Flow of goods and flow of cost are the same
C) Ending inventory is associated with specific purchase prices
D) Low-cost items are often used in this method
E) None of these

Question 40

Inventory turnover at cost is net sales divided by average inventory at retail.

Question 41

Stone Company uses the LIFO method. At the end of the period there are 22 units left in inventory. Given the following, the cost of ending inventory is:

A) $1,400
B) $3,200
C) $1,530
D) $3,150
E) None of these

Question 42

Clay's Fishing Shop's beginning inventory is $70,000 and ending inventory is $36,500. What was Clay's average inventory?

A) $53,250
B) $48,000
C) $35,000
D) $18,250
E) None of these

Question 43

Finney's MMA Gym had a total of $1,300 worth of boxing gloves on June 1. The ending inventory for the month was $524. What was the cost of goods sold for June?

A) $524
B) $1,352
C) $1,824
D) $776
E) None of these

Question 44

Assume Staley's had net sales of $72,000 per day, beginning inventory of $22,000, and ending inventory at retail of $18,900. What was the inventory turnover at retail?

A) 3.57
B) 3.5
C) 5.5
D) 3.0
E) None of these

Question 45

Jones Co. uses the retail inventory method. Given the following data, what is the ending inventory at cost? Sales at retail $80,000, net purchases at cost $41,200, net purchases at retail $66,800, beginning inventory at cost $22,400, beginning inventory at retail $36,800. Round cost ratio to the nearest whole percent.

A) $23,600
B) $63,600
C) $14,936
D) $14,396
E) None of these

Question 46

Calculate using retail method:

Question 47

Calculate inventory turnover at cost (to nearest hundredth):
2.15

Question 48

Johnson Co. uses the retail inventory method. From the following data what is the estimated ending inventory at cost? Net purchases at cost $33,000, beginning inventory at cost $27,000, beginning inventory at retail $35,000, net purchases at retail $45,000, retail sales $70,000.

A) $7,500
B) $30,000
C) $22,500
D) $12,500
E) None of these

Question 49

Molls Co. allocates overhead expenses to all departments on the basis of the floor space (sq. ft.) occupied by each department. The total overhead expenses for a recent year amounted to $80,000. Department A occupied 4,000 square feet, Department B 7,000 square feet, and Department C 9,000 square feet. What is the amount of the overhead allocated to Department C?

Question 50

Complete (assume $100,000 of overhead to be distributed):

A. .25
B. $25,000
C. .75
D. $75,000

Question 51

Bob's Clothing Shop's inventory at cost was $30,000 on January 1. Its retail value is $42,000. During the year, Bob's Clothing Shop purchased additional merchandise at a cost of $196,000 with a retail value of $368,000. The net sales at retail for the year were $310,000. Calculate Bob's inventory at cost by the retail method. Round the cost ratio to the nearest whole percent.

Question 52

Calculate inventory turnover at cost (to nearest hundredth):
1.92

Question 53

Allison Co. has a beginning inventory costing $90,000 and an ending inventory costing $120,000. Sales were $380,000. Assume Allison's markup rate is 40%. Based on the selling price, the inventory turnover at cost (to the nearest hundredth) is:

A) 2.17
B) 2.22
C) 1.47
D) 1.58
E) None of these

Question 54

Bauer Supply had total cost of goods sold of $1,400 with 140 units available for sales. What was the average cost per unit?

A) $10
B) $14
C) $140
D) 14.10
E) None of these

Question 55

Crestwood Paint Supply had a beginning inventory of 10 cans of paint at $25.00 per can. They purchased 20 cans during the month at $30.00 per can. They had an ending inventory valued at $500. How much paint in dollars was used for the month?

A) $250
B) $850
C) $350
D) $1,350
E) None of these

Question 56

Calculate using retail method:

Question 57

Melissa's Dress Shop's inventory at cost on January 1 was $19,400. Its retail value was $36,000. During the year, additional net purchases at a cost of $42,600 were brought in. Its retail value was $64,000. The net sales for the year were $70,000. Melissa's inventory at cost by the retail method is:

A) $30,000
B) $18,600
C) $18,000
D) $12,400
E) None of these

Question 58

Given the following: LIFO method 250 units left in inventory
The cost of ending inventory is:
Totals for each date should include dollars signs in the third column.

A) $1,550
B) $2,300
C) $1,200
D) $3,200
E) None of these

Question 59

Moss Co. uses the FIFO method to calculate ending inventory. Assuming 300 units are not sold, the cost of goods sold is:

A) $7,600
B) $7,280
C) $3,120
D) $3,400
E) None of these

Question 60

Mac's Hardware's gross profit on sales is 40%. At the beginning of January, cost of inventory was $18,000. During one month, Mac had net purchases of $42,000. Net sales at retail for the month were $49,000. The estimated cost of ending inventory using the gross profit method is:

A) $30,600
B) $29,400
C) $60,000
D) $42,000
E) None of these

Question 61

The following information was provided to Mel Blank, owner of Morse Market. Can you help Mel calculate the cost of ending inventory under LIFO, FIFO, and weighted average? During the year, a total of 1,200 were sold.

Question 62

Calculate estimated cost of ending inventory using the gross profit method:

Question 63

Ron Co. has a gross profit on sales of 42%. On November 1, 2011, beginning inventory was $9,000. Net purchases for the month were $35,000. Assuming Ron has retail sales of $60,000 in November, what is the estimated cost of ending inventory using the gross profit method?

Question 64

Calculate estimated cost of ending inventory using the gross profit method:

Question 65

Moore Co. has a beginning inventory at a cost of $50,000 and an ending inventory at a cost of $90,000. Sales were $150,000. Assume Moore's markup rate is 40%. Based on the selling price, what is the inventory turnover at cost? (Round to the nearest hundredth.)
1.29

Question 66

Jane and Bill Co. started with a beginning inventory of $90,000. Ending inventory was $110,000. Cost of goods was $260,000. Complete the inventory turnover at cost for Jane and Bill Co. (to the nearest tenth).
2.6

Question 67

Given the following information, you have been requested by your supervisor to submit the cost of ending inventory under LIFO, FIFO, and weighted average. At year end 850 units remained in inventory.