CIM Inventory Costing & Valuation Flashcards
6 cards from real CIM practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 CIM Inventory Costing & Valuation flashcards as text
What is 'obsolescence cost' as a component of inventory carrying cost?
Answer: Financial loss when inventory can no longer be sold at full value
Obsolescence cost represents the loss in inventory value when items become outdated, expire, or must be heavily discounted due to demand shifts or product changes.
Which inventory costing method assigns the actual historical cost to each individual unit?
Answer: Specific Identification
Specific identification tracks the actual purchase cost of each individual unit and is most practical for high-value, uniquely identifiable items.
A high inventory turnover ratio typically indicates:
Answer: Efficient sales velocity and inventory management
A high inventory turnover ratio shows that goods are selling quickly and the company is not tying up excess capital in slow-moving stock.
Under FIFO during a period of falling prices, what happens to the balance sheet value of ending inventory?
Answer: Ending inventory value is lower
Under FIFO with declining prices, ending inventory is valued at the most recent (lower) costs, producing a lower balance sheet inventory figure.
Economic Order Quantity (EOQ) is primarily designed to minimize:
Answer: Combined total of ordering and holding costs
EOQ calculates the replenishment quantity that minimizes total inventory cost by balancing the trade-off between ordering frequency costs and holding costs.
What does the term 'carrying cost percentage' express?
Answer: Annual holding costs as a percentage of average inventory value
Carrying cost percentage expresses total annual holding costs (storage, capital, insurance, obsolescence) as a percentage of average inventory value, typically ranging from 20–30%.