Inventory Management Quiz

What are the steps involved in determining inventory quantities?

• Counting, weighing, or measuring each kind of inventory on hand

• Estimating the value of inventory based on sales

• Ignoring the inventory counts completely

• Guessing the quantity of inventory without any physical verification

Which costing methods can be applied to quantities on hand?

• Alphabetical order, Numerical order, Date of purchase

• High to low, Low to high, Random order

• Random selection, Most expensive first, Least expensive first

• Specific Identification, First-in, first-out (FIFO), Last-in, first-out (LIFO)

When should goods in transit be included in the inventory?

• When the goods are in the process of being manufactured

• When the company has legal title to the goods

• When the goods are in the warehouse

• When the goods are still with the seller

Which cost flow method often parallels the actual physical flow of merchandise?

• Last-In-First-Out (LIFO)

• First-In-First-Out (FIFO)

• Gross profit method

• Average-Cost

What is the purpose of the lower-of-cost-or-market basis of accounting for inventories?

• To write down the inventory to its market value when it is lower than cost

• To ignore market fluctuations in inventory valuation

• To overstate the inventory value

• To increase the inventory value artificially

How do inventory errors affect the financial statements?

• Only affect the balance sheet

• Affect both the income statement and balance sheet

• Have no impact on financial statements

• Only affect the income statement

What does the inventory turnover ratio measure?

• Number of times on average the inventory is sold during the period

• Total value of inventory at a given point in time

• Profit margin on inventory sales

• Number of days inventory is held

Which method estimates the cost of ending inventory by applying a gross profit rate to net sales?

• Average-Cost Method

• Gross Profit Method

• Retail Inventory Method

• Specific Identification Method

What is the purpose of the retail inventory method?

• To determine inventory at cost by applying cost-to-retail percentage

• To calculate the inventory turnover ratio

• To physically count all inventory items

• To estimate inventory based on sales data

Which method of estimating inventories does not require a physical inventory count?

• Average-Cost Method

• Specific Identification Method

• Gross Profit Method

• Retail Inventory Method