ACC 201 WORKSHOP THREE CONCEPTS OF INVENTORY HANDOUT FOR 3.3 DROPBOX
Download Review the questions below. As you watch the video Concepts of Inventory, take notes and answer the following questions for Dropbox submission:
Question 1. What do you call the difference between Cost of Goods Available for Sale and Ending Inventory? 2. What effect would placing an exaggerated value on ending inventory have on profit and cost of goods sold? Why? 3. When inventory prices are rising, which method would tend to give a higher profit, FIFO or LIFO? Why? 4. Explain the relationship between inventory costing methods and the actual physical flow of goods into and out of inventory. 5. Which method of valuing inventory would be preferred by a manager whose incentive compensation is based upon net profits in an era of rising prices for inventory purchases? 6. Under FIFO, LIFO, and Average Costing, are the oldest units in a company’s inventory valued at their actual cost? For each method, explain why or why not.