ORIE 3150 class notes September 21 2010

ORIE 3150 class notes September 21 2010 - 7:30 9:30 155 28...

Info icon This preview shows pages 1–3. Sign up to view the full content.

ORIE 3150 Inventory September 21, 2010 Prelim I will be held at 7:30 PM – 9:30 PM in Olin 155 on September 28. Closed book, closed notes. Coverage is Homework 1, 2, and 3. Homework #4 will be assigned next week and will be due October 5. A. Merchandise inventory is a current asset. B. The higher the value placed on ending inventory, the lower the cost of goods sold and the higher the gross margin and net income. Beginning inventory + Purchases (including freight-in expense) - Ending inventory Cost of goods sold. Net sales - Cost of goods sold - Total of other expenses Net income C. It is important to manage inventory levels, taking into consideration both the costs of handling, storage, and financing inventories and the cost of lost sales. D. Inventory cost includes purchase price less discounts, freight-in and insurance, and taxes and tariffs. It does not include freight-out, selling expenses, etc. E. Goods flow can be different from the flow of costs. For example, every beer distributor will try to sell the oldest beer first, before it expires. Rotating inventory is a major part of the beer distributor’s job. F. Cost flow is an assumption made about costs for accounting purposes. G. Recall: There are two inventory systems, periodic and perpetual. 1. In the periodic system, no detailed records of the actual inventory on hand are maintained during the period. We start the period with an accurate beginning merchandise inventory. Then we record the net cost of all purchases of merchandise during the period. The sum of these two figures is the goods available for sale. Beginning inventory + Purchases (including freight-in expense) Goods available for sale Then we find merchandise inventory at the end of the period (using records may be enough, but a physical count is best).
Image of page 1

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

Goods available for sale - Ending inventory Cost of goods sold. In the periodic inventory system, the inventory records are only up to date and correct at the end of each period. The cost of goods sold is only recorded at the end of each period.
Image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.
  • '10

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern