ACCT 1220 Chapter Notes - Chapter 5: Inventory Turnover, Profit Margin, Gross Margin

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Merchandising involves purchasing products to resell to a customer. 2 requirements for example: 1) loblaw owns them and 2) they are in the form ready for sale to customers. Retailers: merchandising companies that purchase and sell directly to consumers. Manufacturers: companies that produce goods for sale to wholesalers (or others) Inventory can either be raw materials (on hand), work in process (production started but not complete), or finished goods (completed). Operating cycle is longer for merchandising company than for service company. Cost of goods sold: total cost of merchandise that was sold during the period. Gross profit: sales revenue cost of goods sold. Operating expense: expenses that are incurred in the process of earning sales revenue. Perpetual inventory system: records are recorded for the cost of each product that is purchased and sold. Show the quantity and cost of the inventory bought, sold, etc. on hand.

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