ACCT 251 Chapter 6

specific identification inventory cost flow method

Inventory method in which the unit sold is identified with a specific purchase.

consigned inventory

Merchandise that is shipped by manufacturers to retailers who act as the manufacturer's selling agent.

net realizable value

The estimated selling price of an item of inventory less any direct costs of disposal, such as sales commissions.

receiving report

The form or electronic transmission used by the receiving personnel to indicate that materials have been received and inspected.

first-in, first-out (FIFO) inventory cost flow method

The method of inventory costing based on the assumption that the costs of merchandise sold should be charged against revenue in the order in which the costs were incurred.

average inventory cost flow method

The method of inventory costing that is based on the assumption that costs should be charged against revenue by using the weighted average unit cost of the items sold.

consignor

The name for the manufacturer in a consigned inventory arrangement.

consignee

The name for the retailer in a consigned inventory arrangement.

purchase order

The purchase order authorizes the purchase of the inventory from an approved vendor.

inventory turnover

The relationship between the volume of goods sold and inventory, computed by dividing the cost of goods sold by the average inventory.

number of days' sales in inventory

The relationship between the volume of sales and inventory, computed by dividing the inventory at the end of the year by the average daily cost of goods sold.

physical inventory

A detailed listing of merchandise on hand.

inventory subsidiary ledger

A ledger containing individual accounts with a common characteristic.

gross profit method

A method of estimating inventory cost that is based on the relationship of gross profit to sales.

retail inventory method

A method of estimating inventory cost that is based on the relationship of gross profit to sales.

last-in, first-out (LIFO) inventory cost flow method

A method of inventory costing based on the assumption that the most recent merchandise inventory costs should be charged against revenue.

lower-of-cost-or-market (LCM) method

A method of valuing inventory that reports the inventory at the lower of its cost or current market value (replacement cost).