18 Questions
What are the two characteristics of merchandise inventory in a merchandising company?
They are owned by the company and in a form ready for sale to customers.
What is the classification of inventory in a manufacturing environment?
Raw materials, work in progress, and finished goods
What is the purpose of segregating duties when taking a physical inventory?
To ensure that employees are not responsible for counting the inventory they are in charge of.
What is the formula for calculating the gross profit percentage?
Gross profit / net sales x 100
What is the significance of inventory on the balance sheet of a merchandising company?
It is a significant current asset.
What is the objective of merchandise inventory management techniques?
To optimize inventory levels.
Which of the following is a key aspect of establishing responsibility in inventory management?
Verifying the authenticity of each inventory item
Goods in transit are included in the inventory of the party that has:
Legal title to the goods
In a consignment arrangement, who owns the goods until they are sold?
The consignor
What is the primary difference between a perpetual inventory system and a periodic inventory system?
The timing of cost of goods sold determination
Which of the following is an independent internal verification technique?
Designating a supervisor to check inventory tags
What type of inventory system maintains detailed records of the cost of each item and determines the cost of each item sold when the sale occurs?
Perpetual inventory system
What is the primary difference between periodic and perpetual inventory systems?
The frequency of inventory record updates
In a periodic inventory system, when is the cost of goods sold calculated?
At the end of the accounting period
What is the purpose of taking a physical inventory in a periodic inventory system?
To determine the cost of merchandise on hand and the cost of goods sold
How are inventory costs allocated in a periodic inventory system?
Between ending inventory and cost of goods sold
What is the result of subtracting the cost of ending inventory from the cost of goods available for sale?
Cost of goods sold
According to the matching principle, what is deducted from sales revenue to get gross profit?
Cost of goods sold
Learn about the basics of inventory management, including the steps involved in the merchandising process, and how to calculate gross profit and gross profit percentage.
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