Slater Ch.15 Complete Test Bank Inventory And Overhead

Chapter 15

Inventory and Overhead

True/False Questions
 

1. A perpetual inventory system continually updates inventory records. 
True    False

2. A periodic inventory system requires a physical count of its inventory once a month. 
True    False

3. In valuing inventory, the flow of costs does not always match the flow of goods. 
True    False

4. In the specific identification method, the flow of goods and the flow of costs are not the same. 
True    False

5. The specific identification method is able to identify in the ending inventory the actual invoice cost associated with it. 
True    False

6. The specific identification method might be used by companies with high-cost items. 
True    False

7. In the specific identification method, the total cost of ending inventory is equal to the number of units not sold times the actual cost per unit. 
True    False

8. Cost of goods sold equals cost of goods available for sale plus cost of ending inventory. 
True    False

9. Companies with homogeneous products might use the weighted-average method. 
True    False

10. Weighted-average unit cost is total cost of goods available for sale divided by beginning number of units available for sale. 
True    False

11. In FIFO, the most recent cost is assigned to the inventory sold. 
True    False

12. The gross profit method is a way to estimate the cost of ending inventory without a physical count. 
True    False

13. The cost flow tends to follow the physical flow when FIFO is used. 
True    False

14. During inflation, LIFO produces the highest possible income for a company. 
True    False

15. LIFO doesn't always match the physical flow of goods but still can be used to calculate the flow of costs. 
True    False

16. A company can change from LIFO to FIFO without notifying the Internal Revenue Service. 
True    False

17. Under certain circumstances, ending inventory could be valued at less than cost. 
True    False

18. To use the retail method of estimating ending inventory, the figure for net sales at retail must be known. 
True    False

19. A cost ratio of $.68 means that for each $1 of retail inventory it costs the store $.68. 
True    False

20. The cost ratio times ending inventory at cost equals ending inventory at retail. 
True    False

21. Inventory turnover at cost is net sales divided by average inventory at retail. 
True    False

22. Overhead expense can be allocated to particular departments. 
True    False

Multiple Choice Questions
 

23. Perpetual inventory does not have this characteristic: 
A. High price, limited inventory
B. Verified at some point by a physical count
C. Low price, large inventory
D. Utilizes scanners, computers, etc.
E. None of these

24. In specific identification, which one is not true? 
A. The specific purchase invoice prices are used
B. Flow of goods and flow of cost are the same
C. Ending inventory is associated with specific purchase prices
D. Low-cost items are often used in this method
E. None of these

25. Cost of goods sold is equal to cost of goods available for sale: 
A. Plus cost of ending inventory
B. Minus cost of ending inventory
C. Divided by cost of ending inventory
D. Multiplied by cost of ending inventory
E. None of these

26. The weighted-average method is best used: 
A. For heterogeneous product
B. For homogeneous products
C. Only for grains
D. Only for fuels
E. None of these

27. FIFO assumes all but one of the following: 
A. Sell the old inventory first
B. Recent cost assigned to inventory not sold
C. Sell the new inventory first
D. Cost flow tends to follow physical flow
E. None of these

28. During inflation, the best method to use in inventory valuation that produces the smallest amount of profit is: 
A. LIFO
B. FIFO
C. Specific invoice
D. Weighted average
E. None of these

29. All but which one of the following is information needed to calculate inventory valuation by the retail method? 
A. Beginning inventory at cost and retail
B. Cost of net purchases at cost and retail
C. Net sales at cost
D. Net sales at retail
E. None of these

30. The retail method: 
A. Is not an estimate
B. Does not require a cost ratio
C. Eliminates any need ever to take a physical inventory
D. Aids a company in not having to calculate an inventory cost for each individual item
E. None of these

31. In the retail method the ending inventory at cost is calculated by multiplying the cost ratio times: 
A. Beginning inventory at retail
B. Ending inventory at retail
C. Cost of goods available for sale
D. Net sales for the month
E. None of these

32. The cost ratio in the retail method is found by the cost of goods available for sale at cost divided by: 
A. Net sales
B. Ending inventory at retail
C. Cost of goods available for sale at retail
D. Net purchases at cost
E. None of these

33. Inventory turnover at retail is equal to net sales divided by: 
A. Beginning inventory at retail
B. Average inventory at retail
C. Beginning inventory at cost
D. Average inventory at cost
E. None of these

34. Compared with cost due to theft, spoilage, etc., inventory turnover at retail is usually:  
A. Higher
B. Much higher
C. Lower
D. Much lower
E. None of these

35. With net sales of $40,000, beginning inventory at retail of $14,000, ending inventory at retail of $20,000, and cost of goods sold of $19,500, the inventory turnover at retail is (to the nearest hundredth): 
A. 5.15
B. 3.25
C. 2.35
D. 5.23
E. None of these

36. With beginning inventory at cost of $9,000, ending inventory at cost of $7,000, net sales of $51,000, and cost of goods sold of $46,000, the inventory turnover at cost to the nearest hundredth is: 
A. 5.75
B. 7.55
C. 5.57
D. 7.57
E. None of these

37. Overhead expenses are: 
A. Directly related to a specific department
B. Directly related to a specific product
C. Contributing directly to the running of a business
D. Contributing indirectly to the running of a business
E. None of these

38. Overhead expenses are allocated to particular departments: 
A. Strictly on floor space
B. Strictly on sales volume
C. Based on a ratio of space to sales volume
D. By floor space or sales volume
E. None of these

39. Given: Department A 8,000 sq. ft., Department B 5,000 sq. ft., and Department C 6,000 sq. ft. The percent of overhead expense applied to Department C to the nearest whole percent will be: 
A. 68%
B. 32%
C. 26%
D. 42%
E. None of these

40. With Department A sales of $200,000, Department B sales of $600,000, and overhead expense to be allocated of $25,000, the distribution of overhead to Department A based on sales is: 
A. $18,750
B. $25,000
C. $2,600
D. $6,250
E. None of these

41. Belle Co. has beginning inventory of 12 sets of paints at a cost of $1.50 each. During the year, the store purchased 7 at $3.00, 8 at $3.25, and 12 at $3.50. By the end of the year 31 sets were sold. Using the LIFO method, the cost of ending inventory is: 
A. $28.00
B. $12.00
C. $21.00
D. $3.50
E. None of these

42. Given the following:
FIFO method: 16 units left in inventory
  
The cost of goods sold is: 
A. $5,000
B. $10,000
C. $4,965
D. $5,225
E. None of these

43. Jones Co. uses the retail inventory method. Given the following data, what is the ending inventory at cost? Sales at retail $80,000, net purchases at cost $41,200, net purchases at retail $66,800, beginning inventory at cost $22,400, beginning inventory at retail $36,800. Round cost ratio to the nearest whole percent. 
A. $23,600
B. $63,600
C. $14,936
D. $14,396
E. None of these

44. Given the following:
LIFO method 250 units left in inventory
  
The cost of ending inventory is: 
A. $1,550
B. $2,300
C. $1,200
D. $3,200
E. None of these

45. Joy Co. allocates overhead expenses to all departments on the basis of floor space (sq. ft.) occupied by each department. This year total overhead expenses were $22,000. Department A occupied 15,000 sq. ft., Department B 18,000 sq. ft., and Department C 9,000 sq. ft. The amount of overhead allocated to Department B is (round to the nearest dollar): 
A. $1,800
B. $9,429
C. $9,900
D. $39,600
E. None of these

46. Allison Co. has a beginning inventory costing $90,000 and an ending inventory costing $120,000. Sales were $380,000. Assume Allison's markup rate is 40%. Based on the selling price, the inventory turnover at cost (to the nearest hundredth) is: 
A. 2.17
B. 2.22
C. 1.47
D. 1.58
E. None of these

47. Johnson Co. uses the retail inventory method. From the following data, what is the estimated ending inventory at cost? Net purchases at cost $33,000, beginning inventory at cost $27,000, beginning inventory at retail $35,000, net purchases at retail $45,000, retail sales $70,000.
A. $7,500
B. $30,000
C. $22,500
D. $12,500
E. None of these

48. Stone Company uses the LIFO method. At the end of the period there are 22 units left in inventory. Given the following, the cost of ending inventory is:
   
A. $1,400
B. $3,200
C. $1,530
D. $3,150
E. None of these

49. Moss Co. uses the FIFO method to calculate ending inventory. Assuming 300 units are not sold, the cost of goods sold is:
   
A. $7,600
B. $7,280
C. $3,120
D. $3,400
E. None of these

50. Melissa's Dress Shop’s inventory at cost on January 1 was $19,400. Its retail value was $36,000. During the year, additional net purchases at a cost of $42,600 were brought in. Its retail value was $64,000. The net sales for the year were $70,000. Melissa's inventory at cost by the retail method is: 
A. $30,000
B. $18,600
C. $18,000
D. $12,400
E. None of these

51. Mac's Hardware’s gross profit on sales is 40%. At the beginning of January, cost of inventory was $18,000. During one month, Mac had net purchases of $42,000. Net sales at retail for the month were $49,000. The estimated cost of ending inventory using the gross profit method is: 
A. $30,600
B. $29,400
C. $60,000
D. $42,000
E. None of these

52. Crestwood Paint Supply had a beginning inventory of 10 cans of paint at $25.00 per can. They purchased 20 cans during the month at $30.00 per can. They had an ending inventory valued at $500. How much paint in dollars was used for the month?

A. $250

B. $850

C. $350

D. $1,350

E. None of these

53. Finney’s MMA Gym had a total of $1,300 worth of boxing gloves on June 1. The ending inventory for the month was $524. What was their cost of goods sold for June?

A. $524

B. $1,352

C. $1,824

D. $776

E. None of these

54. Bauer Supply had total cost of goods sold of $1,400 with 140 units available for sales. What was the average cost per unit?

A. $10

B. $14

C. $140

D. 14.10

E. None of these

55. Assume Staley’s had net sales of $72,000 per day, beginning inventory of $22,000, and ending inventory at retail of $18,900. What was the inventory turnover at retail?

A. 3.57

B. 3.5

C. 5.5

D. 3.0

E. None of these

56. Clay’s Fishing Shop’s beginning inventory is $70,000 and ending inventory is $36,500. What was Clay’s average inventory?

A. $48,250

B. $48,000

C. $35,000

D. $18,250

E. None of these

Short Answer Questions
 

57.  1. LIFO
2. FIFO
3. Weighted average
4. Specific identification
5. Inventory turnover
6. Overhead expense
7. Perpetual
8. Periodic
9. Retail method
10. Average inventory
11. Gross profit method
A. Average cost for that period for inventory
B. Each cost is known
C. A ratio used to calculate cost of ending inventory
D. New inventory sold first
E. Inventory not updated continually
F. (Beginning inventory and ending inventory) ÷ 2
G. Inventory continually updated
H. A ratio
I. Operating expenses not directly associated with a specific department
J. Old inventory sold first
K. Cost percentage 

58. Complete the table:
  
A. _______________
B. _______________
C. _______________
D. _______________
21 units sold 

59.   
Calculate:
  
A. ______________
B. ______________
C. ______________
D. ______________
E. ______________
F. ______________ 

60. Calculate cost of ending inventory using the retail method:
   

61. Calculate inventory turnover at cost (to nearest tenth):
   

62. Complete (assume $50,000 of overhead to be distributed):
  
A. ______________
B. ______________
C. ______________
D. ______________ 

63. Jane’s April 1 inventory had a cost of $48,000 and a retail value of $70,000. During April, net purchases cost $210,000 with a retail value of $390,000. Net sales at retail for Jane for April were $280,000. Calculate the cost of ending inventory using the retail inventory method. (Round cost ratio to the nearest hundredth percent.) 

64. Moore Supermarket began the year with 300 boxes of oat flake cereal with a unit cost of $1.89. During the year the following additional purchases were made:
  
At the end of year, Moore had 475 boxes of oat flakes on the shelf and in the back room. Assuming LIFO, calculate (A) cost of ending inventory and (B) cost of goods sold. 

65. Melvin Corporation allocates overhead to all departments based on the square footage occupied by each department. The shoe department occupies 3,000 sq. ft., the toy department 6,000 sq. ft., and the dress department 7,000 sq. ft. Total overhead to be allocated is $64,000. What is the amount allocated to the dress department? 

66. Given the following, calculate the estimated cost of ending inventory using the gross profit method.
   

67. Pete's Convenience Store has a beginning inventory of 12 cans of soup at a cost of $.85 each. During the year, the store purchased 4 at $.95, 6 at $1.05, 7 at $1.35, and 8 at $1.50. By the end of the year, 18 cans were sold. Calculate (A) the number of cans of soup ending inventory and (B) the cost of ending inventory under LIFO, FIFO, and weighted average. 

68. Molls Co. allocates overhead expenses to all departments on the basis of the floor space (sq. ft.) occupied by each department. The total overhead expenses for a recent year amounted to $80,000. Department A occupied 4,000 square feet, Department B 7,000 square feet, and Department C 9,000 square feet. What is the amount of the overhead allocated to Department C? 

69. French Co. has a beginning inventory of $77,000 and an ending inventory of $80,000. Sales were $280,000. Assume French's markup rate on selling price is 40%. Based on the selling price, what is the inventory turnover at cost? Round to the nearest hundredth. 

70. Bob's Clothing Shop’s inventory at cost was $30,000 on January 1. Its retail value is $42,000. During the year, Bob's Clothing Shop purchased additional merchandise at a cost of $196,000 with a retail value of $368,000. The net sales at retail for the year were $310,000. Calculate Bob's inventory at cost by the retail method. Round the cost ratio to the nearest whole percent. 

71. Blue Company on January 1 had inventory costing $65,000 and during January had net purchases of $119,000. Over recent years, Blue's gross profit has averaged 40% on sales. Assuming that the company has net sales of $190,000, calculate the estimated cost of ending inventory by using the gross profit method. 

72. Complete the table:
  
A. _____________ B. _____________ C. _____________ D. _____________ 

73. Complete the table:
  
A. _____________
B. _____________
C. _____________
D. _____________
24 units not sold 

74. Calculate:
  
A. ______________
B. ______________
C. ______________
D. ______________
20 units not sold
   

75. Calculate:
   

76. Calculate using retail method:
   

77. Calculate using retail method:
   

78. Calculate inventory turnover at cost (to nearest hundredth):
   

79. Calculate inventory turnover at cost (to nearest hundredth):
   

80. Complete (assume $60,000 of overhead to be distributed):
   

81. Complete (assume $100,000 of overhead to be distributed):    

82. Calculate estimated cost of ending inventory using the gross profit method:
   

83. Calculate estimated cost of ending inventory using the gross profit method:
   

84. The following information was provided to Mel Blank, owner of Morse Market. Can you help Mel calculate the cost of ending inventory under LIFO, FIFO, and weighted average? During the year, a total of 1,200 were sold.
   

85. Jane and Bill Co. started with a beginning inventory of $90,000. Ending inventory was $110,000. Cost of goods was $260,000. Complete the inventory turnover at cost for Jane and Bill Co. (to the nearest tenth). 

86. Using the retail method, could you calculate the value of ending inventory at cost for Morse Co.? Round the cost ratio to the nearest hundredth.
   

87. Javon Corp. had a beginning inventory of 300 cans of paint on January 1 at a cost of $2,100. During the year, the following purchases were made:
  
Assuming 310 cans were left in inventory, what is the cost of ending inventory under the LIFO method? 

88. Ron Co. has a gross profit on sales of 42%. On November 1, 2014, beginning inventory was $9,000. Net purchases for the month were $35,000. Assuming Ron has retail sales of $60,000 in November, what is the estimated cost of ending inventory using the gross profit method? 

89. Given the following information, you have been requested by your supervisor to submit the cost of ending inventory under LIFO, FIFO, and weighted average. At year end 850 units remained in inventory.
   

90. Moore Co. has a beginning inventory at a cost of $50,000 and an ending inventory at a cost of $90,000. Sales were $150,000. Assume Moore's markup rate is 40%. Based on the selling price, what is the inventory turnover at cost? (Round to the nearest hundredth.) 

91. Bill Company's total overhead for a recent year was $100,000. Department A occupies 18,500 sq. ft., Department B 12,000 sq. ft., and Department C 4,000 sq. ft. What is amount of overhead allocated to Department B? (Round to the nearest whole percent.) 

92. Calculate the average inventory for the following:

Beginning inventory: $29,600

Ending inventory: $6,500

93. Calculate the gross profit for the following:

Gross profit on sales: 47%

Beginning inventory on July 1: $49,009

Net purchase: $18,252

Net sales at retail for July: $14,400

94. Calculate the inventory turnover at cost for the following: average inventory $20,590, cost of goods sold $50,900, net sales $119,800.

95. Calculate a cost ratio for the following:

Cost of goods available for sale at cost: $47,123

Cost of goods available for sale at retail: $55,605

96. Calculate average inventory for the following:

Beginning inventory: $123,485.23

Ending inventory: $99.173

.