Chapter 18 - Inventory and overhead. In this chapter, the learning objectives are: List the key assumptions of each inventory method, calculate the cost of ending inventory and cost of goods sold for each inventory method, calculate the cost ratio and ending inventory at cost for the retail method, calculate the estimated inventory using the gross profit method, explain and calculate inventory turnover, explain overhead; allocate overhead according to floor space and sales. | Chapter 18 Inventory and Overhead List the key assumptions of each inventory method Calculate the cost of ending inventory and cost of goods sold for each inventory method Inventory and Overhead #18 Learning Unit Objectives Assigning Costs to Ending Inventory - Specific Identification; Weighted Average; FIFO; LIFO Calculate the cost ratio and ending inventory at cost for the retail method Calculate the estimated inventory, using the gross profit method Explain and calculate inventory turnover Explain overhead; allocate overhead according to floor space and sales Inventory and Overhead #18 Learning Unit Objectives Retail Method; Gross Profit Method; Inventory Turnover; Distribution of Overhead Perpetual Inventory System - keeps a running account of inventory by updating with each transaction Inventory Systems Periodic Inventory System - Relies on a physical count of inventory done periodically Number of Cost Total Units Purchased per unit cost Beginning . | Chapter 18 Inventory and Overhead List the key assumptions of each inventory method Calculate the cost of ending inventory and cost of goods sold for each inventory method Inventory and Overhead #18 Learning Unit Objectives Assigning Costs to Ending Inventory - Specific Identification; Weighted Average; FIFO; LIFO Calculate the cost ratio and ending inventory at cost for the retail method Calculate the estimated inventory, using the gross profit method Explain and calculate inventory turnover Explain overhead; allocate overhead according to floor space and sales Inventory and Overhead #18 Learning Unit Objectives Retail Method; Gross Profit Method; Inventory Turnover; Distribution of Overhead Perpetual Inventory System - keeps a running account of inventory by updating with each transaction Inventory Systems Periodic Inventory System - Relies on a physical count of inventory done periodically Number of Cost Total Units Purchased per unit cost Beginning Inventory 40 $8 $320 First Purchase (April 1) 20 9 180 Second Purchase (May 1) 20 10 200 Third Purchase (Oct. 1) 20 12 240 Fourth Purchase (Dec. 1) 20 13 260 Goods available for sale 120 $1,200 Units Sold 72 Units in ending inventory 48 Blue Company - Inventory Information Step 1 Step 2. Calculate the cost of ending inventory Step 3. Calculate the cost of goods sold (Step 1- Step 2) Step 1. Calculate the cost of goods (Merchandise available for sale) Beg Inv. 4/1 5/1 10/1 12/1 Specific Identification Method Cost per unit Total cost 20 Units from April 1 $ 9 $180 20 Units from Oct. 1 $12 240 8 Units from Dec. 1 $13 104 Cost of ending inventory $524 Cost of goods - Cost of ending = Cost of available for sale inventory goods sold $1,200 - $524 = $676 Step 3 Step 2 Specific Identification Method Weighted Average Method Weighted avg = Total cost of goods available for sale = $1,200 = $10 Unit cost Total number of units available for sale 120 Average cost of ending inventory: 48 .
