MGMT 1A Lecture Notes - Lecture 8: Weighted Arithmetic Mean
Document Summary
Begging inventory + net purchases = merchandise available for sale = ending. Advantages and disadvantages of lifo and fifo: linked to physical ow, matching, valuation, taxes, opportunity for income manipulation, dif culty in earnings prediction, comparison of nancial statements under lifo and fifo. Lifo reserve = ending inventory (fifo) - ending inventory (lifo) = cumulative difference in fifo - lifo inventory: lifo reserve = cogs (lifo) - cogs (fifo) Assessing inventory management: inventory turnover ratios. Times inventory turnover = cogs / average inventory. Days inventory turnover = 365 days / times inventory turnover. Estimation of ending inventory: gross pro t method: based on cost of goods sold computation. Estimates inventory without counting anything (much faster and easier) Gross pro t method= beginning inventory + net purchases - cost of. Goods sold: retail method: company must keep track of cost and retail of inventory. Determine cost of goods sold at retail price. Determine cost of goods sold at cost price.
