会计学-财务会计.7.pptVIP

Inventory Turnover The number of days’ sales in inventory for Best Buy is computed below (in millions). Appendix Estimating Inventory Cost Retail Method of Inventory Costing The retail inventory method of estimating inventory cost requires costs and retail prices to be maintained for the merchandise available for sale. A ratio of cost to retail price is then used to convert ending inventory at retail to estimate the ending inventory cost. RETAIL METHOD OF INVENTORY COSTING Gross Profit Method of Inventory Costing The gross profit method uses the estimated gross profit for the period to estimate the inventory at the end of the period. GROSS PROFIT METHOD OF INVENTORY COSTING Inventories The End * * * * * Weighted Average Cost Method The weighted average cost method uses the weighted average unit cost for determining cost of merchandise sold and the ending merchandise inventory. Average cost per unit Ending Inventory Weighted Average Cost Method Weighted Average Cost Method Learning Objective Compare and contrast the use of the three inventory costing methods. 5 Comparing Inventory Cost Methods Using the perpetual inventory system illustration with sales of $39,000 (1,300 units x $30), the differences in ending inventory, cost of merchandise sold, and gross profit are illustrated in the next three slides. PARTIAL INCOME STATEMENTS (FIFO) PARTIAL INCOME STATEMENTS (WEIGHTED AVERAGE COST) PARTIAL INCOME STATEMENTS (LIFO) COMPARING INVENTORY COST METHODS Comparing Inventory Cost Methods When the FIFO method is used during a period of inflation or rising prices, FIFO will show a larger profit than the other two inventory costing methods. Comparing Inventory Cost Methods When the LIFO method is used during a period of inflation or rising prices, LIFO will show a lower profit than the other two inventory costing methods. During a period of rising prices, using LIFO offers an income tax savings compared to the other two inventory costing methods. Comparing Inventory Cost M