Exam 15: Inventory and Overhead

Johnson Co. uses the retail inventory method. From the following data what is the estimated ending inventory at cost? Net purchases at cost $33,000, beginning inventory at cost $27,000, beginning inventory at retail $35,000, net purchases at retail $45,000, retail sales $70,000.

Bob's Clothing Shop's inventory at cost was $30,000 on January 1. Its retail value is $42,000. During the year, Bob's Clothing Shop purchased additional merchandise at a cost of $196,000 with a retail value of $368,000. The net sales at retail for the year were $310,000. Calculate Bob's inventory at cost by the retail method. Round the cost ratio to the nearest whole percent.

FIFO assumes all but one of the following:

The cost flow tends to follow the physical flow when FIFO is used.

Cost of goods sold equals cost of goods available for sale plus cost of ending inventory.

With Department A sales of $200,000, Department B sales of $600,000, and overhead expense to be allocated of $25,000, the distribution of overhead to Department A based on sales is:

Weighted-average unit cost is total cost of goods available for sale divided by beginning number of units available for sale.

Calculate using retail method:

The following information was provided to Mel Blank, owner of Morse Market. Can you help Mel calculate the cost of ending inventory under LIFO, FIFO, and weighted average? During the year, a total of 1,200 were sold.

In valuing inventory, the flow of costs does not always match the flow of goods.

Calculate estimated cost of ending inventory using the gross profit method:

A perpetual inventory system continually updates inventory records.

The weighted-average method is best used:

In specific identification, which one is not true?

Overhead expense can be allocated to particular departments.

To use the retail method of estimating ending inventory, the figure for net sales at retail must be known.

Given the following information, you have been requested by your supervisor to submit the cost of ending inventory under LIFO, FIFO, and weighted average. At year end 850 units remained in inventory.

Overhead expenses are allocated to particular departments:

During inflation, the best method to use in inventory valuation that produces the smallest amount of profit is:

Allison Co. has a beginning inventory costing $90,000 and an ending inventory costing $120,000. Sales were $380,000. Assume Allison's markup rate is 40%. Based on the selling price, the inventory turnover at cost (to the nearest hundredth) is: