Day 111: Review for Ch 6 Quiz - Inventory

Purchasing Process
Inventory Costing Methods
Comparing Methods
Lower of Cost or Market and Net Realizable Value
Analyzing Inventory Management Efficiency

1. Describe the purchasing process. Include information about the documents used and the departments impacted.
2. What is the difference between a perpetual and a periodic inventory system?
3. When are physical counts of inventory typically performed?
4. Which type of companies would use the specific identification method?
5. Under which inventory method would each of the following be true:
• older inventory
• newer inventory
• higher cost of goods sold
• lower cost of goods sold
• sell old inventory first
• sell new inventory first
• higher value of inventory
• lower value of inventory
• most current costs are used to value inventory
• older costs are used to value inventory
• higher net income
• lower net income
• higher taxes lower taxes
6. Explain the concepts of Lower-of-Cost-or-Market and Net Realizable Value
7. Why is it important to effectively manage your inventories?
8. What is the purpose of the Inventory Turnover calculation and what does it measure?
9. What are the formulas for calculating Inventory Turnover and Days Sales in Inventory