AFC Inventory Management Flashcards
6 cards from real AFC practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 AFC Inventory Management flashcards as text
Under the FIFO (First-In, First-Out) inventory method, which units are assumed to be sold first?
Answer: The oldest purchased units
FIFO assumes the first units purchased are the first units sold, so ending inventory reflects the most recent costs.
Which inventory costing method typically results in the highest net income during a period of rising prices?
Answer: FIFO
During rising prices, FIFO assigns lower (older) costs to cost of goods sold, resulting in higher gross profit and net income.
A company uses the weighted-average cost method. It has 100 units at $10 and purchases 200 more units at $13. What is the weighted-average cost per unit?
Answer: $12.00
Weighted-average cost = Total cost ÷ Total units = [(100×$10)+(200×$13)] ÷ 300 = $3,600 ÷ 300 = $12.00.
Under the lower-of-cost-or-net-realizable-value (LCNRV) rule, inventory is written down when:
Answer: Its net realizable value falls below its recorded cost
GAAP requires inventory to be reported at the lower of its historical cost or net realizable value, recording a loss when NRV drops below cost.
Which inventory system records cost of goods sold and updates inventory balances after each individual sale?
Answer: Perpetual system
A perpetual inventory system continuously updates inventory and COGS records with every purchase and sale transaction.
Goods in transit shipped FOB shipping point should be included in whose inventory at year-end?
Answer: The buyer's inventory
Under FOB shipping point, title transfers to the buyer when goods leave the seller's dock, so the buyer owns the goods in transit.