HAC Healthcare Supply Chain & Inventory Accounting Flashcards

Under GAAP, which inventory valuation method is prohibited for US publicly reported healthcare entities that also report under IFRS?

Answer: LIFO (Last-In, First-Out)

IFRS prohibits the LIFO method for inventory valuation, so entities that must comply with both US GAAP and IFRS cannot use LIFO.

A hospital's supply charge master lists an item at $45, but the vendor invoice shows $42. Under the lower-of-cost-or-net-realizable-value rule, what is the correct balance sheet value?

Answer: $42.00

ASC 330 requires inventory to be recorded at the lower of cost or net realizable value; since actual cost ($42) is lower than the list price, $42 is used.

Which type of supply cost in a hospital is BEST classified as a direct supply cost rather than overhead?

Answer: Surgical implants used in a specific patient procedure

Surgical implants traceable to a specific patient procedure are direct supply costs because they are directly attributable to patient care delivery.

A healthcare supply chain manager uses an economic order quantity (EOQ) model. Which two costs does EOQ balance to minimize total inventory cost?

Answer: Ordering cost and carrying (holding) cost

EOQ minimizes total inventory cost by finding the order quantity where the sum of ordering costs (per order placed) and carrying costs (cost to hold inventory) is lowest.

When a hospital writes down expired pharmaceutical inventory to zero, which financial statement is directly impacted?

Answer: Income statement (supply/inventory expense increases) and balance sheet (inventory decreases)

A write-down of inventory increases expense on the income statement and reduces the carrying value of inventory on the balance sheet simultaneously.

A hospital uses a perpetual inventory system. Which is an advantage over a periodic system for high-value medical supplies?

Answer: Real-time tracking of inventory balances after each transaction

A perpetual system updates inventory records with every receipt and issuance, providing continuous visibility into stock levels critical for high-value medical supplies.