Deck 18: Inventory and Overhead

Question 1

In FIFO, the most recent cost is assigned to the inventory sold.

Answer 1

False

Question 2

The cost ratio times ending inventory at cost equals ending inventory at retail.

Answer 2

False

Question 3

The specific identification method might be used by companies with high-cost items.

Answer 3

True

Question 4

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

Question 5

Companies with homogeneous products might use the weighted-average method.

Question 6

Under certain circumstances, ending inventory could be valued at less than cost.

Question 7

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

Question 8

In the specific identification method, the total cost of ending inventory is equal to the number of units not sold times the actual cost per unit.

Question 9

During inflation, LIFO produces the highest possible income for a company.

Question 10

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

Question 11

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

Question 12

LIFO doesn't always match the physical flow of goods but still can be used to calculate the flow of costs.

Question 13

The gross profit method is a way to estimate the cost of ending inventory without a physical count.

Question 14

In the specific identification method, the flow of goods and the flow of costs are not the same.

Question 15

A periodic inventory system requires a physical count of its inventory once a month.

Question 16

A cost ratio of $0.68 means that for each $1 of retail inventory it costs the store $0.68.

Question 17

Inventory value means the flow of costs does not always match the flow of goods.

Question 18

The specific identification method is able to identify in the ending inventory the actual invoice cost associated with it.

Question 19

A company can change from LIFO to FIFO without notifying the Internal Revenue Service.

Question 20

A perpetual inventory system continually updates inventory records.

Question 21

Cost of goods sold is equal to cost of goods available for sale:

A)Plus cost of ending inventory
B)Minus cost of ending inventory
C)Divided by cost of ending inventory
D)Multiplied by cost of ending inventory
E)None of these

Question 22

The retail method:

A)Is an estimate
B)Requires a cost ratio
C)Is used by many companies
D)Aids a company in not having to calculate an inventory cost for each individual item
E)All of these

Question 23

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:

A)$18,750
B)$25,000
C)$2,600
D)$6,250
E)None of these

Question 24

Compared with inventory turnover at cost, inventory turnover at retail is usually:

A)Higher
B)Much higher
C)Lower
D)Much lower
E)None of these

Question 25

FIFO assumes all but one of the following:

A)Sell the old inventory first
B)Recent cost assigned to inventory not sold
C)Sell the new inventory first
D)Cost flow tends to follow physical flow
E)None of these

Question 26

The cost ratio in the retail method is found by the cost of goods available for sale at cost divided by:

A)Net sales
B)Ending inventory at retail
C)Cost of goods available for sale at retail
D)Net purchases at cost
E)None of these

Question 27

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

A)LIFO
B)FIFO
C)Specific invoice
D)Weighted average
E)None of these

Question 28

All but which one of the following is information needed to calculate inventory valuation by the retail method?

A)Cost of goods available for sale at retail
B)Cost of goods available for sale at cost
C)Gross sales
D)Net sales
E)None of these

Question 29

In specific identification, which one is not true?

A)The specific purchase invoice prices are used
B)Flow of goods and flow of cost are the same
C)Ending inventory is associated with specific purchase prices
D)Low-cost items are often used in this method
E)None of these

Question 30

The weighted-average method is best used:

A)For heterogeneous product
B)For homogeneous products
C)Only for grains
D)Only for fuels
E)None of these

Question 31

With beginning inventory at cost of $9,000, ending inventory at cost of $7,000, net sales of $51,000, and cost of goods sold of $46,000, the inventory turnover at cost to the nearest hundredth is:

A)5.75
B)7.55
C)5.57
D)7.57
E)None of these

Question 32

Overhead expenses are:

A)Directly related to a specific department
B)Directly related to a specific product
C)Contributing directly to the running of a business
D)Contributing indirectly to the running of a business
E)None of these

Question 33

Overhead expenses are allocated to particular departments:

A)Strictly on floor space
B)Strictly on sales volume
C)Based on a ratio of space to sales volume
D)By floor space or sales volume
E)None of these

Question 34

With net sales of $40,000, beginning inventory at retail of $14,000, ending inventory at retail of $20,000, and cost of goods sold of $19,500, the inventory turnover at retail is (to the nearest hundredth):

A)5.15
B)3.25
C)2.35
D)5.23
E)None of these

Question 35

Overhead expense can be allocated to particular departments.

Question 36

Given: Department A. 8,000 sq. ft., Department B. 5,000 sq. ft., and Department C. 6,000 sq. ft. The percent of overhead expense applied to Department C to the nearest whole percent will be:

A)68%
B)32%
C)26%
D)42%
E)None of these

Question 37

Perpetual inventory does not have this characteristic:

A)Made easier by the increased use of computers
B)Verified at some point by a physical count
C)Usually used by small stores
D)Utilizes scanners, computers, etc.
E)None of these

Question 38

Inventory turnover at cost is net sales divided by average inventory at retail.

Question 39

Inventory turnover at retail is equal to net sales divided by:

A)Beginning inventory at retail
B)Average inventory at retail
C)Beginning inventory at cost
D)Average inventory at cost
E)None of these

Question 40

In the retail method the ending inventory at cost is calculated by multiplying the cost ratio times:

A)Beginning inventory at retail
B)Ending inventory at retail
C)Cost of goods available for sale
D)Net sales for the month
E)None of these

Question 41

Jones Co. uses the retail inventory method. Given the following data, what is the ending inventory at cost? Sales at retail $80,000, net purchases at cost $41,200, net purchases at retail $66,800, beginning inventory at cost $22,400, beginning inventory at retail $36,800. Round cost ratio to the nearest whole percent.

A)$23,600
B)$63,600
C)$14,936
D)$14,396
E)None of these

Question 42

Match the following terms with their definitions.

-FIFO

A)Average cost for that period for inventory
B)Inventory continually updated
C)(Beginning inventory and ending inventory)÷ 2
D)New inventory sold first
E)Cost percentage
F)Inventory not updated continually
G)Each cost is known
H)Old inventory sold first
I)A ratio
J)A ratio used to calculate cost of ending inventory
K)Operating expenses not directly associated with a specific department

Question 43

Match the following terms with their definitions.

-Inventory turnover

A)Average cost for that period for inventory
B)Inventory continually updated
C)(Beginning inventory and ending inventory)÷ 2
D)New inventory sold first
E)Cost percentage
F)Inventory not updated continually
G)Each cost is known
H)Old inventory sold first
I)A ratio
J)A ratio used to calculate cost of ending inventory
K)Operating expenses not directly associated with a specific department

Question 44

Moss Co. uses the FIFO method to calculate ending inventory. Assuming 300 units are not sold, the cost of goods sold is: $$\begin{array} { | l | l | l | } \hline \text { January 1 Inventory } & 200 \text { units at } \$ 9 & \$ 1,800 \\\hline \text { Feb 15 Purchase } & 300 \text { units at } \$ 10 & \$ 3,000 \\\hline \text { Aug 20 Purchase } & 400 \text { units at } \$ 11 & \$ 4,400 \\\hline \text { Dec 20 Purchase } & 100 \text { units at } \$ 12 & \$ 1,200 \\\hline\end{array}$$

A)$7,600
B)$7,280
C)$3,120
D)$3,400
E)None of these

Question 45

Stone Company uses the LIFO method. At the end of the period there are 22 units left in inventory. Given the following, the cost of ending inventory is: $$\begin{array} { | l | l | l | } \hline \text { January } & 20 \text { units at } \$ 70 & \$ 1,400 \\\hline \text { March } & 36 \text { units at } \$ 65 & \$ 2,340 \\\hline \text { July } & 40 \text { units at } \$ 80 & \$ 3,200 \\\hline\end{array}$$

A)$1,400
B)$3,200
C)$1,530
D)$3,150
E)None of these

Question 46

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 (markup is based on selling price)is 40%. Based on the selling price, the inventory turnover at cost (to the nearest hundredth)is:

A)2.17
B)2.22
C)1.47
D)1.58
E)None of these

Question 47

Crestwood Paint Supply had a beginning inventory of 10 cans of paint at $25.00 per can. They purchased 20 cans during the month at $30.00 per can. They had an ending inventory valued at $500. How much paint in dollars was used for the month?

A)$250
B)$850
C)$350
D)$1,350
E)None of these

Question 48

Belle Co. has beginning inventory of 12 sets of paints at a cost of $1.50 each. During the year, the store purchased 7 at $3.00, 8 at $3.25, and 12 at $3.50. By the end of the year 31 sets were sold. Using the LIFO method, the cost of ending inventory is:

A)$28.00
B)$12.00
C)$21.00
D)$3.50
E)None of these

Question 49

Clay's Fishing Shop's beginning inventory is $70,000 and ending inventory is $36,500. What was Clay's average inventory?

A)$53,250
B)$48,000
C)$35,000
D)$18,250
E)None of these

Question 50

Finney's MMA Gym had a total of $1,300 worth of boxing gloves on June 1. The ending inventory for the month was $524. What was the cost of goods sold for June?

A)$524
B)$1,352
C)$1,824
D)$776
E)None of these

Question 51

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.

A)$7,500
B)$30,000
C)$22,500
D)$12,500
E)None of these

Question 52

Given the following: FIFO method: 16 units left in inventory
$$\begin{array} { | l | l | l | } \hline \text { Jan 1 } & \text { Beginning Inventory } & 9 \text { units at } \$ 105 = \$ 945 \\\hline \text { April 13 } & \text { Purchased } & 14 \text { units at } \$ 120 = \$ 1,680 \\\hline \text { Sept 17 } & \text { Purchased } & 20 \text { units at } \$ 130 = \$ 2,600 \\\hline \text { Dec 10 } & \text { Purchased } & 14 \text { units at } \$ 140 = \$ 1,960 \\\hline\end{array}$$ The cost of goods sold is:

A)$5,000
B)$10,000
C)$4,965
D)$5,225
E)None of these

Question 53

Given the following: LIFO method 250 units left in inventory $$\begin{array} { | l | l | l | } \hline \text { Beginning inventory } & 200 \text { units at } \$ 6 & \$ 1,200 \\\hline \text { Purchases: } & & \\\hline \text { Apr 10 } & 400 \text { units at } \$ 7 & \$ 2,800 \\\hline \text { May 15 } & 250 \text { units at } \$ 7 & \$ 1,600 \\\hline \text { Tuly } 9 & 200 \text { units at } \$ 8 & \$ 1,600 \\\hline \text { Oct } 8 & 100 \text { units at } \$ 11 & \$ 1,100 \\\hline\end{array}$$ The cost of ending inventory is:

A)$1,550
B)$2,300
C)$1,200
D)$3,200
E)None of these

Question 54

Assume Staley's had net sales of $72,000 per day, beginning inventory of $22,000, and ending inventory at retail of $18,900. What was the inventory turnover at retail?

A)3.57
B)3.5
C)5.5
D)3.0
E)None of these

Question 55

Match the following terms with their definitions.

-Average inventory

A)Average cost for that period for inventory
B)Inventory continually updated
C)(Beginning inventory and ending inventory)÷ 2
D)New inventory sold first
E)Cost percentage
F)Inventory not updated continually
G)Each cost is known
H)Old inventory sold first
I)A ratio
J)A ratio used to calculate cost of ending inventory
K)Operating expenses not directly associated with a specific department

Question 56

Bauer Supply had total cost of goods sold of $1,400 with 140 units available for sales. What was the average cost per unit?

A)$10
B)$14
C)$140
D)$14.10
E)None of these

Question 57

Melissa's Dress Shop's inventory at cost on January 1 was $19,400. Its retail value was $36,000. During the year, additional net purchases at a cost of $42,600 were brought in. Its retail value was $64,000. The net sales for the year were $70,000. Melissa's inventory at cost by the retail method is:

A)$30,000
B)$18,600
C)$18,000
D)$12,400
E)None of these

Question 58

Match the following terms with their definitions.

-LIFO

A)Average cost for that period for inventory
B)Inventory continually updated
C)(Beginning inventory and ending inventory)÷ 2
D)New inventory sold first
E)Cost percentage
F)Inventory not updated continually
G)Each cost is known
H)Old inventory sold first
I)A ratio
J)A ratio used to calculate cost of ending inventory
K)Operating expenses not directly associated with a specific department

Question 59

Mac's Hardware's gross profit on sales is 40%. At the beginning of January, cost of inventory was $18,000. During one month, Mac had net purchases of $42,000. Net sales at retail for the month were $49,000. The estimated cost of ending inventory using the gross profit method is:

A)$30,600
B)$29,400
C)$60,000
D)$42,000
E)None of these

Question 60

Joy Co. allocates overhead expenses to all departments on the basis of floor space (sq. ft.)occupied by each department. This year total overhead expenses were $22,000. Department A. occupied 15,000 sq. ft., Department B. 18,000 sq. ft., and Department C. 9,000 sq. ft. The amount of overhead allocated to Department B is (round to the nearest dollar):

A)$1,800
B)$9,429
C)$9,900
D)$39,600
E)None of these

Question 61

Complete the table, given 21 units are sold:
$$\begin{array} { | l | c | c | c | c | } \hline \text { Beg. Inventory } & & \text { Units } & \text { Unit Cost } & \text { Dollar Cost } \\\hline & \text { Jan 1 } & 8 & \$ 6.00 & \text { A } \\\hline & \text { Apr 11 } & 24 & \$ 11.00 & \text { B } \\\hline & \text { May 17 } & 30 & \$ 14.00 & \text { C } \\\hline & \text { Dec 5 } & 19 & \$ 16.00 & \text { D } \\\hline\end{array}$$

Question 62

Melvin Corporation allocates overhead to all departments based on the square footage occupied by each department. The shoe department occupies 3,000 sq. ft., the toy department 6,000 sq. ft., and the dress department 7,000 sq. ft. Total overhead to be allocated is $64,000. What is the amount allocated to the dress department?

Question 63

Match the following terms with their definitions.

-Perpetual

A)Average cost for that period for inventory
B)Inventory continually updated
C)(Beginning inventory and ending inventory)÷ 2
D)New inventory sold first
E)Cost percentage
F)Inventory not updated continually
G)Each cost is known
H)Old inventory sold first
I)A ratio
J)A ratio used to calculate cost of ending inventory
K)Operating expenses not directly associated with a specific department

Question 64

Match the following terms with their definitions.

-Retail method

A)Average cost for that period for inventory
B)Inventory continually updated
C)(Beginning inventory and ending inventory)÷ 2
D)New inventory sold first
E)Cost percentage
F)Inventory not updated continually
G)Each cost is known
H)Old inventory sold first
I)A ratio
J)A ratio used to calculate cost of ending inventory
K)Operating expenses not directly associated with a specific department

Question 65

Given the following, with 21 units remaining:
$$\begin{array} { | l | c | c | c | } \hline \text { Beg. Inventory } & & \text { Units } & \text { Unit Cost } \\\hline & \text { Jan 1 } & 8 & \$ 6.00 \\\hline & \text { Apr 11 } & 24 & \$ 11.00 \\\hline & \text { May 17 } & 30 & \$ 14.00 \\\hline & \text { Dec 5 } & 19 & \$ 16.00 \\\hline\end{array}$$ Calculate:
$$\begin{array} { | l | c | c | c | } \hline & \text { LIFO } & \text { FIFO } & \begin{array} { c } \text { Weighted- } \\\text { Average }\end{array} \\\hline \text { Cost of Ending Inventory } & \text { A } & \text { C } & \text { E } \\\hline \text { Cost of Goods Sold } & \text { B } & \text { D } & \text { F } \\\hline\end{array}$$

Question 66

Given the following, calculate the estimated cost of ending inventory using the gross profit method.
$$\begin{array} { | l | l | } \hline \text { Gross profit on sales } & 28 \% \\\hline \text { Beg Inventory Jan 1, 2017 } & \$ 60,000 \\\hline \text { Net Purchases } & \$ 44,000 \\\hline \text { Net Sales at Retail } & \$ 55,000 \\\hline\end{array}$$

Question 67

Match the following terms with their definitions.

-Overhead expense

A)Average cost for that period for inventory
B)Inventory continually updated
C)(Beginning inventory and ending inventory)÷ 2
D)New inventory sold first
E)Cost percentage
F)Inventory not updated continually
G)Each cost is known
H)Old inventory sold first
I)A ratio
J)A ratio used to calculate cost of ending inventory
K)Operating expenses not directly associated with a specific department

Question 68

Calculate cost of ending inventory using the retail method:
$$\begin{array} { | l | c | c | } \hline & \text { Cost } & \text { Retail Price } \\\hline \text { Beginning Inventory } & \$ 60,000 & \$ 102,000 \\\hline \text { Purchases during the year } & \$ 25,000 & \$ 40,000 \\\hline \text { Sales for Year } & \$ 60,000 & \\\hline\end{array}$$

Question 69

Match the following terms with their definitions.

-Periodic

A)Average cost for that period for inventory
B)Inventory continually updated
C)(Beginning inventory and ending inventory)÷ 2
D)New inventory sold first
E)Cost percentage
F)Inventory not updated continually
G)Each cost is known
H)Old inventory sold first
I)A ratio
J)A ratio used to calculate cost of ending inventory
K)Operating expenses not directly associated with a specific department

Question 70

Pete's Convenience Store has a beginning inventory of 12 cans of soup at a cost of $.85 each. During the year, the store purchased 4 at $.95, 6 at $1.05, 7 at $1.35, and 8 at $1.50. By the end of the year, 18 cans were sold. Calculate (A)the number of cans of soup in the ending inventory and (B)the cost of ending inventory under LIFO, FIFO, and weighted average.

Question 71

Moore Supermarket began the year with 300 boxes of oat flake cereal with a unit cost of $1.89. During the year the following additional purchases were made:
$$\begin{array} { | c | l | } \hline \text { May 1 } & 200 \text { boxes @ } \$ 2.10 \text { each } \\\hline \text { June 1 } & 400 \text { boxes @ } \$ 2.20 \text { each } \\\hline \text { August 1 } & 250 \text { boxes @ } \$ 2.40 \text { each } \\\hline\end{array}$$ At the end of the year, Moore had 475 boxes of oat flakes on the shelf and in the back room. Assuming LIFO, calculate (A)cost of ending inventory and (B)cost of goods sold.

Question 72

Match the following terms with their definitions.

-Gross profit method

A)Average cost for that period for inventory
B)Inventory continually updated
C)(Beginning inventory and ending inventory)÷ 2
D)New inventory sold first
E)Cost percentage
F)Inventory not updated continually
G)Each cost is known
H)Old inventory sold first
I)A ratio
J)A ratio used to calculate cost of ending inventory
K)Operating expenses not directly associated with a specific department

Question 73

Calculate inventory turnover at cost (to nearest tenth):
$$\begin{array} { | l | l | l | l | } \hline \text { Ending Inventory } & \$ 35,000 & \text { Beginning Inventory } & \$ 25,000 \\\hline \text { Cost of goods sold } & \$ 42,00 & \text { Net Sales } & \$ 5,800 \\\hline\end{array}$$

Question 74

Complete (assume $50,000 of overhead to be distributed):
$$\begin{array} { | l | l | l | l | } \hline& & & \text { Amt of Overhead } \\& \text { Sq. Ft. } & \text { Ratio } & \text { Allocated } \\\hline \text { Dept. A } & 20,000 & \text { A } & \text { B } \\\hline \text { Dept. B } & 80,000 & \text { C } & \text { D } \\\hline\end{array}$$

Question 75

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.

Question 76

French Co. has a beginning inventory of $77,000 and an ending inventory of $80,000. Sales were $280,000. Assume French's markup rate on selling price is 40%. Based on the selling price, what is the inventory turnover at cost? Round to the nearest hundredth.

Question 77

Match the following terms with their definitions.

-Weighted average

A)Average cost for that period for inventory
B)Inventory continually updated
C)(Beginning inventory and ending inventory)÷ 2
D)New inventory sold first
E)Cost percentage
F)Inventory not updated continually
G)Each cost is known
H)Old inventory sold first
I)A ratio
J)A ratio used to calculate cost of ending inventory
K)Operating expenses not directly associated with a specific department

Question 78

Jane's April 1, inventory had a cost of $48,000 and a retail value of $70,000. During April, net purchases cost $210,000 with a retail value of $390,000. Net sales at retail for Jane for April were $280,000. Calculate the cost of ending inventory using the retail inventory method.

Question 79

Match the following terms with their definitions.

-Specific identification

A)Average cost for that period for inventory
B)Inventory continually updated
C)(Beginning inventory and ending inventory)÷ 2
D)New inventory sold first
E)Cost percentage
F)Inventory not updated continually
G)Each cost is known
H)Old inventory sold first
I)A ratio
J)A ratio used to calculate cost of ending inventory
K)Operating expenses not directly associated with a specific department

Question 80

Molls Co. allocates overhead expenses to all departments on the basis of the floor space (sq. ft.)occupied by each department. The total overhead expenses for a recent year amounted to $80,000. Department A occupied 4,000 square feet, Department B 7,000 square feet, and Department C 9,000 square feet. What is the amount of the overhead allocated to Department C?