Concept: Methods of Inventory Valuation : Some of the inventory valuation methods are as follows: FIFO: Stands for First In First Out. Under this method of inventory valuation, the costs to be assigned to ending inventories are, the costs of the goods first purchased, i.e. the company assigns the closing inventory costs at the costs of the first purchase, since the goods purchased first are assumed to be sold first. LIFO: Stands for Last In First Out. Under this method of inventory valuation, the costs to be assigned to ending inventories are, the costs of the goods last purchased, i.e. the company assigns the closing inventory costs at the costs of the last purchase, since the goods purchased first are assumed to be sold first. WA: Stands for Weighted Average. Under this method of inventory valuation, the costs to be assigned to ending inventories are, the weighted average costs of purchases i.e. the total costs of purchases divided by the weights of products of the purchases, since the cost of goods purchased is averaged out. SA: Stands for Simple Average. Under this method of inventory valuation, the costs to be assigned to ending inventories are, the simple average costs of purchases i.e. the total costs of purchases divided by the number of products of the purchases, since the cost of goods purchased is averaged out. Methods a company can use to assign costs of goods sold and ending inventory.

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Chapter 6, Problem 8DQ

To determine

Concept:

Methods of Inventory Valuation:

Some of the inventory valuation methods are as follows:

FIFO: Stands for First In First Out. Under this method of inventory valuation, the costs to be assigned to ending inventories are, the costs of the goods first purchased, i.e. the company assigns the closing inventory costs at the costs of the first purchase, since the goods purchased first are assumed to be sold first.

LIFO: Stands for Last In First Out. Under this method of inventory valuation, the costs to be assigned to ending inventories are, the costs of the goods last purchased, i.e. the company assigns the closing inventory costs at the costs of the last purchase, since the goods purchased first are assumed to be sold first.

WA: Stands for Weighted Average. Under this method of inventory valuation, the costs to be assigned to ending inventories are, the weighted average costs of purchases i.e. the total costs of purchases divided by the weights of products of the purchases, since the cost of goods purchased is averaged out.

SA: Stands for Simple Average. Under this method of inventory valuation, the costs to be assigned to ending inventories are, the simple average costs of purchases i.e. the total costs of purchases divided by the number of products of the purchases, since the cost of goods purchased is averaged out.

Methods a company can use to assign costs of goods sold and ending inventory.

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MCQ

A manufacturing company applies overhead based on direct labor hours. At the beginning of the year, it was estimated that overhead costs would be $450,000 and direct labor hours would be 90,000. Actual overhead costs incurred were $459,000 and actual direct labor hours were 95,000. What is the amount of overapplied or underapplied overhead at the end of the year?