Inventory Management Test Answer

The __________ is the difference between the cost of goods sold based on replacement cost and the cost of goods sold based on acquisition cost.

a. operating margin

b. realized holding gain

c. unrealized holding gain

d. gross margin

Which of the following is NOT a characteristic of the use of current value bases to determine inventory values and cost of goods sold?

a. Current value basis shows current information that can be more useful.

b. The information is generally easier to obtain.

c. The information may be difficult to audit.

d. None of the above

The difference between the current replacement cost of the ending inventory and its acquisition cost is the ____________.

a. cost of goods sold

b. actual cost

c. average cost

d. unrealized holding gain

Which of the following is NOT a factor when applying the lower of the cost method or the market valuation method?

a. Replacement cost

b. Net realizable value

c. Standard cost

d. Acquisition cost

Which of the following is not a period expense?

a. Salary of the vice president of sales

b. Salaries of factory custodial employees

c. Salaries of administrative clerical personnel

d. Salaries of employees who deliver the finished product to customers

Which of the following concepts states that if a firm uses a LIFO assumption in its income tax return, it must also use LIFO in its financial reports to shareholders?

a. FIFO rule

b. IRS tax code

c. LIFO conformity rule

d. GAAP

Which of the following concepts states that gains (or losses) caused by increases (or decreases) in the market value of assets should not appear in the income until a firm sells the particular assets?

a. Net income concept

b. Weighted average

c. LIFO

d. Realization convention

Which of the following inventory cost flow assumptions is physically appropriate for liquid or other types of products for which distinguishing different lots is difficult?

a. Specific cost

b. Weighted average method

c. Depletion

d. Lot costing

Which of the following is NOT an example of distressed inventory?

a. Food with an expiration date that has passed

b. Two-year-old cell phones

c. Automobile tires

d. Daily newspaper

The procedure in which a manufacturing firm includes all production costs as a cost of the product is called ____________.

a. standard costing

b. full absorption costing

c. average costing

d. weighted costing

The term "safety stock" ___________.

a. refers to the minimum stock that a firm must have on hand

b. is the same as JIT Inventory

c. refers to a "buffer stock" that is kept on hand so the firm does not run out of an item if there is an increase in demand

d. refers to the inventory of safety-related items

Standard cost levels are typically set ____________.

a. annually

b. daily

c. monthly

d. every decade

The difference between the selling price of an item and its replacement cost at the time of sale is the ____________.

a. cost of goods sold

b. net income

c. operating expense

d. operating margin

The term "indirect costs" refers to ____________.

a. costs not directly incurred in the manufacturing process but which are necessary for the operation

b. costs with no specific amount

c. materials costs

d. finished goods

Which of the following terms sometimes denotes the realized holding gain on inventory?

a. COGS

b. FIFO

c. LIFO

d. Inventory profit

Variable costing (direct costing) is acceptable for use in determining inventory cost by ____________.

a. the Financial Accounting Standards Board

b. the Internal Revenue Service

c. either a or b

d. neither a nor b

Partially completed products in the factory are called ____________ .

a. work in process

b. finished goods

c. cost of goods sold

d. raw materials

If the _________ is used for income tax purposes, the Internal Revenue Service requires its use for income determination for financial reports to owners.

a. FIFO method

b. LIFO method

c. Weighted average method

d. Replacement cost method

The primary benefit of cycle counting is that ____________.

a. it's less work than an annual count

b. the IRS prefers it

c. it eliminates the need for a year-end count of the entire inventory

d. it results in higher net income

Losses from inventory due to theft, evaporation, and waste are called __________.

a. average cost

b. realization

c. shrinkage

d. costing

The difference between cost of goods sold based on replacement cost and cost of goods sold based on acquisition cost is the ____________.

a. cost of goods sold

b. realized holding gain

c. net income

d. operating expense

Which of the following is a predetermined estimate of what each item of manufactured inventory should cost based on past cost and planned production methods?

a. Standard cost

b. Average cost

c. LIFO

d. FIFO

Which of the following inventory methods typically results in a lower net income?

a. LIFO

b. Average cost

c. FIFO

d. Standard cost

The term "economy of scale" refers to ____________.

a. economic equilibrium

b. the lower per-unit costs that result from buying in bulk

c. a measuring tool for goods with mass

d. the optimal order quantity

Which of the following cost flow assumptions assigns the costs of the earliest units acquired to the withdrawals, and the costs of the most recent acquisitions to the ending inventory?

a. FIFO

b. LIFO

c. Average costing

d. Weighted costing

A stock of goods owned by a firm and held for sale to customers is called __________.

a. cost of goods sold

b. FIFO

c. inventory

d. LIFO

Which of the following inventory systems is designed so that the cost of withdrawals is recorded at the time assets are withdrawn from inventory?

a. Periodic inventory system

b. Perpetual inventory system

c. LIFO

d. FIFO

The Cost of Goods Sold can be defined as ______________.

a. Beginning Inventory + Inventory Purchases + Costs of Production - Ending Inventory = COGS

b. Ending Inventory = COGS

c. Beginning Inventory = COGS

d. Inventory Purchases = COGS

For an auto manufacturer, steel would be considered ______________.

a. COGS

b. WIP

c. a finished good

d. a raw material

Which of the following is the contra account title used to record discounts for early payments for merchandise?

a. Purchase discounts

b. Accounts receivable discounts

c. Trade discounts

d. Cost of goods sold

Which of the following is the correct sequence of cost flows for a manufacturing firm?

a. Work in Process, Finished Goods, Cost of Goods Sold, Raw Materials

b. Raw Materials, Work in Process, Finished Goods, Cost of Goods Sold

c. Cost of Goods Sold, Raw Materials, Work in Process, Finished Goods

d. Finished Goods, Work in Process, Raw Materials, Cost of Goods Sold

The selling price less the cost of marketing equals the ____________.

a. net income

b. operating expense

c. net realizable value

d. cash flow

Under which of the following cost flow assumptions does the income statement report out-of-date cost of goods sold?

a. FIFO method

b. LIFO method

c. Weighted average method

d. Replacement cost method

The __________ is the estimated selling price of the inventory less any estimated costs for making the item ready for sale and actually selling it.

a. replacement cost

b. standard cost

c. net realizable value

d. market selling value

The portion of merchandise that is available for sale or use and that is allocated to the current period's usage is called the ____________.

a. total inventory

b. raw materials

c. cost of goods sold

d. finished goods

Conventionally, accountants refer to the difference between sales and cost of goods sold as the ___________.

a. operating margin

b. realized holding gain

c. unrealized holding gain

d. gross margin

The term "JIT Inventory" means ___________.

a. Just Info Technology Inventory

b. Just In Time Inventory

c. Juice Is Tasty Inventory

d. Job Info Tech Inventory

FIFO refers to the cost of the units sold. The parallel description for ending inventory is ___________.

a. LIFO

b. specific cost

c. average cost

d. LISH

No entry is made for withdrawals from inventory until the end of the period under which of the following systems?

a. Perpetual inventory system

b. Periodic inventory system

c. Cash flow system

d. JIT inventory system

Which of the following is the correct equation for determining the cost of goods sold?

a. Beginning Inventory - Purchases + Ending Inventory = Cost of Goods Sold

b. Beginning Inventory + Purchases - Ending Inventory = Cost of Goods Sold

c. Beginning Inventory + Purchases + Ending Inventory = Cost of Goods Sold

d. None of the above