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Business Administration
Business Administration 2257
Jason Dean

CHAPTER 8 (PART II) – REPORTING AND INTERPRETING COST OF GOODS SOLD AND INVENTORY DELL INC. Three generally accepted inventory costing methods: 1. Specific identification 2. First-in, first-out (FIFO) 3. Weighted average Specific identification method: Identifies the cost of the specific item was sold. The choice of an inventory costing method is NOT based on the physical flow of goods on and off the shelves. FIFO: Assumes that the oldest units (the first costs in) are the first units sold, and the last goods purchased are left in ending inventory. Perpetual inventory system  COGS calculated throughout accounting period. Periodic inventory system  COGS calculated once at end of accounting period. Weighted-average cost method: Uses the weighted-average unit cost of the goods available for sale for both cost of goods sold and ending inventory. Periodic system: Number of monitors x unit cost = Total cost Average cost = Cost of goods available for sale Number of monitors available for sale Perpetual system: Called moving weighted-average cost method. See page 419 for example. Three inventory costing methods differ only in the portion of goods available for sale allocated to COGS vers
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