Inclusion of all manufacturing costs (fixed and variable) in the cost of finished goods inventory in accordance with GAAP.
Based on the theory that a minimal level of inventory is a permanent investment, this amount is carried on the books at its historical cost.
Goods that result as an ancillary product from the production of a primary good; often having minor value when compared to the value of the principal product(s).
In lower of cost or market
Marketing method in which the consignor ships goods to the consignee, who acts as an agent for the consignor in selling the goods. The inventory remains the property of the consignor until sold by the consignee.
Inclusion of only variable manufacturing costs in the cost of ending finished goods inventory. This method is not acceptable for financial reporting purposes.
Variation of conventional LIFO in which layers of inventory are priced in dollars adjusted by price indexes instead of
Method used to compute the conversion price index. The index indicates the relationship between the base year and current prices in terms of a percentage.
Completed but unsold products produced by a manufacturing firm.
Cost flow assumption; the first goods purchased or produced are assumed to be the first goods sold.
In lower of cost or market computations, market is limited to net realizable value less a normal profit, called the floor. Market (replacement cost) cannot be below the floor.
Goods being shipped from seller to buyer at year-end.
Method used to estimate the amount of ending inventory based on the cost of goods available for sale, sales, and the gross profit percentage.
Assets held for sale in the normal course of business, or which are in the process of production for such sale, or are in the form of materials or
Under the LIFO method, an increase in inventory quantity during a period.
Two or more products produced jointly, where
Cost flow assumption; the last goods purchased are assumed to be the first goods sold.
Liquidation of the LIFO base or old inventory layers when inventory
Inventory costing method that combines the LIFO cost flow assumption and the retail inventory method.
Method of applying dollar-value LIFO by developing a single cumulative index. This method may be used instead of double-extension only when there are substantial changes in product lines over the
Inventories must be valued at lower of cost or market (replacement cost). Market cannot exceed the ceiling (net realizable value) or be less than the floor (net realizable value less a normal markup).
Decrease below original retail price. A markdown cancellation is an increase (not above original retail price) in retail price after a markdown.
Increase above original retail price. A markup cancellation is a decrease (not below original retail price) in retail price after a markup.
Inventory costing method used in conjunction with a
Estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.
Inventory system where quantities are determined only periodically by physical count.
Inventory system where up-to-date records of inventory quantities are kept.
Arrangements whereby an entity buys inventory for another firm that agrees to purchase the inventory over a certain period at specified prices which include handling and financing costs; alternatively, an entity can buy inventory from another firm with the understanding that the seller will repurchase the goods at the original price plus defined storage and financing costs.
Noncancelable commitment to purchase goods. Losses on such commitments are recognized in the accounts.
For a manufacturing firm, materials on hand awaiting entry into the production process.
Cost to reproduce an inventory item by purchase or manufacture. In lower of cost or market computations, the
Inventory costing method that uses a cost ratio to reduce ending inventory (valued at retail) to cost.
Inventory system where the seller identifies which specific items are sold and which
Predetermined unit costs, which are acceptable for financial reporting purposes if adjusted periodically to reflect current conditions.
Periodic inventory costing method where ending inventory and cost of goods sold are priced at the weighted-average cost of all items available for sale.
For a manufacturing firm, the inventory of partially completed products.