ACC 131 Lecture Notes - Lecture 6: Income Statement, Gross Profit, Fifo (Computing And Electronics)
Document Summary
If prices paid for goods are constant: ending inventory x cost per unit = cost of ending inventory. Inventory cost models bear no relationship to physical movement of goods. Bi + p ei = cogs: cogs = units sold x cost per unit, 4 inventory costing methods: Records of each purchase for company information. Technology makes it possible for broad range of goods. Oldest purchases are cost of goods sold. Cost flow assumption is accurate representation of physical flow. Physical flow of goods does not have to match this for company to use this pricing method. Generates lower gross margins than other methods in period of rising inventory prices. Most recent purchases are allocated to cost of goods sold. Cost flow assumption rarely coincides w/ actual physical flow of inventory. Weighted avg. cost per unit: allocates costs of goods available for sale between ei and cogs based on avg.
