unit-8-Inventory-measurement.ppt

Saturday,May 25,2024inventory measurement1Unit 8 Inventory MeasurementSaturday,May 25,2024inventory measurement2Learning Objectives1.Definition of inventory;2.Importance of measuring inventory by using proper method;3.Generally acceptable methods of measuring inventory.Saturday,May 25,2024inventory measurement3New Words,Phrases And Special Terms1.overstated2.Acquisition3.Manipulation4.Perishable5.Style-affected6.Understated7.Periodic/perpetual inventory system8.8.Raw MaterialsRaw Materials1.夸大，高估2.2.取得，获得，收购取得，获得，收购3.3.操纵，控制，操纵，控制，伪造4.4.易腐坏的，不经久的易腐坏的，不经久的5.5.受式样影响的受式样影响的6.6.低调，低估低调，低估7.7.定期定期/永续盘存制永续盘存制8.8.原材料原材料Saturday,May 25,2024inventory measurement4New Words,Phrases And Special Terms9.Specific identification10.Weighted average11.First-in,first-out(FIFO)12.Last-in,first-out(LIFO)13.13.Factory overheadFactory overhead14.Physical inventory counts15.Fuels 16.Containers9.个别记价法10.加权平均法11.先进先出法12.后进先出法13.13.制造费用制造费用14.实物盘点15.燃料16.包装物Saturday,May 25,2024inventory measurement517.Work in Process or Goods in Process18.Semi-finished goods 19.Semi-manufactured Goods20.Finished Goods 21.Low-value Consumption Goods 22.Supplies New Words,Phrases And Special Terms17.在产品18.半成品19.自制在产品20.产成品21.低值易耗品22.物料Saturday,May 25,2024inventory measurement6What is Inventory Inventory is defined as assets that are:-intended for sale;-in process of being produced for sale;-to be used in producing goods.Flow of Inventory CostsMerchandiseMerchandisePurchasesPurchasesCost ofCost ofGoods SoldGoods SoldMerchandiseMerchandiseInventoryInventoryMerchandiserRawRawMaterialsMaterialsRaw MaterialsRaw MaterialsInventoryInventoryWork in ProcessWork in ProcessInventoryInventoryFinished GoodsFinished GoodsInventoryInventoryCost ofCost ofGoods SoldGoods SoldManufacturerDirectDirectLaborLaborFactoryFactoryOverheadOverheadNature of Inventory and Cost of Goods SoldBeginningBeginningInventoryInventoryPurchasesPurchasesfor the Periodfor the PeriodEnding InventoryEnding Inventory(Balance Sheet)(Balance Sheet)Goods availableGoods availablefor Salefor SaleCost of Goods SoldCost of Goods Sold(Income Statement)(Income Statement)Beginning inventory+Purchases Ending inventory=Cost of goods soldBeginning inventory+Purchases Ending inventory=Cost of goods soldSaturday,May 25,2024inventory measurement91.Periodic systems do not keep a continuous record of inventory on hand.2.Perpetual systems maintain a running record to show the inventory on hand at all times.Inventory Accounting SystemsInventory Subsidiary LedgerHow can we determine the unit cost for the Sept.sales and the balance?Saturday,May 25,2024inventory measurement11Inventory costing methods:1.Specific unit cost2.Weighted-average cost3.First-in,first-out(FIFO)4.Last-in,first-out(LIFO)Saturday,May 25,2024inventory measurement12Beginning inventory(6 units$10)$60No.1(10 units$11 per unit)$110No.2(10 units$13 per unit)130No.3(4 units$15 per unit)60Total purchases 300Cost of goods available for sale$360Ending inventory:8 unitsCost of goods sold:22 unitsIllustrative DataSpecific Unit CostEnding inventory=$360$256=$1049 Units$119 Units$134 Units$10Since specific identification is so easy,cant we use it all the time?Not really.Specific identification is hard to use when we sell a lot of inventory that has lots of different costs.Specific identification cost1.It is best suited to high-valuehigh-value,low-quantitylow-quantity and easily distinguishableeasily distinguishable items.Examples:Automobiles,Examples:Automobiles,antique,art,furniture.antique,art,furniture.Saturday,May 25,2024inventory measurement16Weighted-AverageSaturday,May 25,2024inventory measurement17Average-Cost MethodAdvantage:This method is simple to apply,objective,and not as subject to income manipulation as other methods.Disadvantage:It is impossible to measure a specific physical flow of inventory.First-In,First-Out4 Units$102 Units$107 Units$113 Units$116 Units$13First-In,First-OutFirst-In,First-Out(FIFO)Costs of Goods SoldEnding InventoryRecent CostsOldest CostsSaturday,May 25,2024inventory measurement21First-In,First-OutAdvantage:the ending inventory is close to current cost.Disadvantage:the cost of good sold is not close to current cost,so it is not matched against current revenuedistortions in gross profit and net income.Last-In,First-Out4 Units$114 Units$155 Units$135 Units$134 Units$11Last-In,First-OutEnding Inventory Cost:Last-In,First-OutEnding InventoryCost of Goods SoldOldest CostsRecent CostsSaturday,May 25,2024inventory measurement25Advantage&disadvantage of LIFOAdvantage:The most attractive feature of LIFO is that its lowest taxable income reduced income tax payments(cash flow)during inflation.Thats why many companies prefer LIFO during high inflation.Disadvantage:The ending inventory is not close to current cost.Saturday,May 25,2024inventory measurement26Comparison LIFO With FIFO 1.LIFO matches the most current costs with current revenues;FIFO reports the most current ending inventory costs on balance sheet.2.During inflation,LIFO results in lowest income taxes;but use of FIFO overstates income because of FIFO inventory profitFIFO inventory profit.3.When prices are rising,LIFO allows manipulation manipulation of net income.Saturday,May 25,2024inventory measurement271.Many companies use LIFO for tax and external reporting purposes,but maintain a FIFO,average cost,or standard cost system for internal reporting purposes.2.Because LIFO does not approximate the physical flow of the inventory,and allows income manipulation.LIFO is prohibited in many nations,such as the United Kingdom,Australia,China,etc.More about LIFOSaturday,May 25,2024inventory measurement28Income Effects of inventory MethodsSpecific unit cost$1,000 256=$744Weighted-average$1,000 264=$736FIFO$1,000 248=$752LIFO$1,000 278=$722AssumedSalesRevenueCost ofGoodsSoldGrossProfitUse of the Various Inventory Costing Methods choose the best answer1.During a period of rising prices,the inventory method that yields the highest net income and the lowest inventory value,respectively,will be _.A.LIFO and FIFO.B.weighted-average and LIFO.C.LIFO and LIFO.D.FIFO and LIFO.2.Which of the following items is the greatest in dollar amount?A.Beginning inventoryB.Cost of goods sold.C.Cost of goods available for saleD.Ending inventorySaturday,May 25,2024inventory measurement32 choose the best answer3.Why do companies prefer the LIFO inventory method during a period of rising prices?A.Higher reported incomeB.Lower income taxesC.Lower reported incomeD.Higher ending inventorySaturday,May 25,2024inventory measurement33 choose the best answerMeasuring Efficiency in Inventory Management Cost of Goods Sold =Average InventoryInventory TurnoverAverage Inventory is.Average Inventory is.(Beginning Inventory+Ending Inventory)2(Beginning Inventory+Ending Inventory)2Saturday,May 25,2024inventory measurement35Key sentences1.Proper income determination depends on the appropriate measurement of all assets;the higher the assets amounts,the higher the income that will be reported.恰当的收益确定取决于所有资产的适当计量，资产的金额估算得越高，所报告的收益也就越高Saturday,May 25,2024inventory measurement36Key sentences 2.The specific identification approach to inventory most naturally fits operations that involve somewhat differentiated products of a relatively high unit value.个别计价法适合那些差异化强而且单位价值相当高的存货。Saturday,May 25,2024inventory measurement37Key sentences 3.The weighted average approach to inventory measurement is best suited to operations that involve a large volume of undifferentiated goods stored in common areas.存货计价的加权平均法最适合于经营中所包含的储存在同一地点的难以区别的大量商品。Saturday,May 25,2024inventory measurement38Key sentences 4、Most companies especially those with perishable or style affected goods as a matter of good business attempt to sell the oldest merchandise first.大多数公司，尤其是那些经营容易腐坏或受式样影响的商品的公司，总是企图把最早购进的商品尽先销售出去。Saturday,May 25,2024inventory measurement39Key sentences 5.LIFO better matches current cost against current revenues because the most recent purchase are reflected as cost of goods sold.后进先出法较好地使当前的成本与当前的收入相配合，因为反映在销货成本中的是最近购入的商品 Saturday,May 25,2024inventory measurement40Exercises Exercises