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
Which inventory costing method assumes the first items purchased are the first items sold?
Answer: FIFO
FIFO (First-In, First-Out) assumes the earliest purchased inventory is sold first, leaving newer costs in ending inventory.
Under LIFO during periods of rising prices, what effect does it have on reported net income compared to FIFO?
Answer: Lower net income
LIFO matches the most recent (higher) costs against revenue, reducing gross profit and resulting in lower net income during inflation.
The weighted average cost method calculates inventory cost by:
Answer: Dividing total inventory cost by total units available
The weighted average method computes a blended cost per unit by dividing total inventory cost by total units available for sale.
Which inventory valuation method is prohibited under International Financial Reporting Standards (IFRS)?
Answer: LIFO
LIFO is banned under IFRS because it can produce outdated balance sheet values that don't reflect the actual physical flow of goods.
The Lower of Cost or Net Realizable Value (LCNRV) rule requires a write-down when:
Answer: Historical cost exceeds net realizable value
LCNRV requires inventory to be reported at the lower of its purchase cost or its expected selling price minus completion and selling costs.
What does the inventory turnover ratio measure?
Answer: How many times inventory is sold and replaced in a period
Inventory turnover (COGS ÷ Average Inventory) measures how efficiently a company sells through and replenishes its inventory over a period.