Chapter6Terms - Average-cost method Inventory costing...

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Average-cost method Inventory costing method that uses the weighted-average unit cost to allocate to ending inventory and cost of goods sold the cost of goods available for sale. Conservatism Concept that dictates that when in doubt, choose the method that will be least likely to overstate assets and net income. Consigned goods Goods held for sale by one party although ownership of the goods is retained by another party. Consistency principle Dictates that a company use the same accounting principles and methods from year to year. Current replacement cost The current cost to replace an inventory item. Days in inventory Measure of the average number of days inventory is held; calculated as 365 divided by inventory turnover ratio. First-in, first-out (FIFO) method Inventory costing method that assumes that the costs of the earliest goods purchased are the first to be recognized as cost of goods sold. Finished goods inventory Manufactured items that are completed and ready for sale.
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