ORIE ch 7 outline - ORIE 350 CH 7 OUTLINE CH...

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ORIE 350 CH 7 O UTLINE C H 7—I NVENTORIES : T HE S OURCE OF O PERATING P ROFITS 1. A R EVIEW OF F UNDAMENTALS —I NVENTORY 1. Inventory = a stock of goods or other items that firm owns and holds for sale or for further processing as part of its business operations 1. Merchandise inventory = goods held for sale by a merchandising firm (retail or wholesale businesses) 2. Finished goods inventory = goods held for sale by a manufacturing firm 3. Raw materials inventory = materials being stored that will become part of goods to be produced 4. Work-in-process inventory = partially completed products in the factory 2. T HE I NVENTORY E QUATION 1. Inventory equation = Beginning Inventory + Additions Withdrawals = Ending Inventory Goods Available for Sale (or Use) Or Beginning Inventory + Additions – Ending Inventory = Withdrawals Goods Available for Sale (or Use) 3. I SSUES IN I NVENTORY A CCOUNTING 1. 3 issues in inventory accounting 1. [1] costs included in the acquisition cost of inventory 2. [2] the treatment of changes in the market value of inventories subsequent to acquisition 3. [3] cost flow assumption used to trace the movement of costs into & out of inventory 4. I SSUE 1: C OSTS I NCLUDED IN I NVENTORY 1. Merchandising firms 1. Acquire inventory items in a physical condition ready for sale 2. Acquisition cost includes invoice price ( less any cash discounts taken for prompt payment) 3. includes cost of transporting, receiving, unpacking, inspecting, & shelving 4. includes any costs to record purchases in the accounts
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This note was uploaded on 04/05/2009 for the course ORIE 350 taught by Professor Callister during the Summer '08 term at Cornell University (Engineering School).

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ORIE ch 7 outline - ORIE 350 CH 7 OUTLINE CH...

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