At December 31, 2012, the following information (in thousands) was available for Kitselman Inc.: ending inventory $22, 600; beginning inventory $21, 400; the cost of goods sold $181,000, and sales revenue $430,000. Calculate the inventory turnover ratio and days in inventory for Kitselman.
Grother Company uses the periodic inventory method and had the following inventory information available:
|Units||Unit Cost||Total Cost|
A physical count of inventory on December 31 revealed that there were 325 units on hand.
Answer the following independent questions and show computations supporting your answers.
1. Assume that the company uses the FIFO method. The value of the ending inventory at December 31 is $_____.
2. Assume that the company uses the average cost method. The value of the ending inventory on December 31 is $_____.
3. Assume that the company uses the LIFO method. The value of the ending inventory on December 31 is $_____.
4. Determine the difference in the amount of income that the company would have reported if it had used the FIFO method instead of the LIFO method. Would income have been greater or less?
Common methods of inventory valuation are FIFO, LIFO and average cost method. FIFO means first in first out wherein first units bought should also be the first items to be sold. LIFO on the other hand is last in first out which means that last items bought should be the first items to be sold. Average costing computes inventory amounts by getting the average cost of purchases.
Answer and Explanation: 1
a. Inventory turnover is computed using the following formula:
Inventory turnover = Cost of goods sold / Average inventory
Inventory turnover = Cost...
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fromChapter 6 / Lesson 11
Inventory valuation methods are ways that companies place a monetary value on the items they have in their inventory. Discover different inventory valuation methods, including specific identification, First-In-First-Out (FIFO), Last-In-First-Out (LIFO), and weighted average.