Inventory Management and Cost of Goods Sold Quiz

FIFO assumes that the oldest inventory items are sold first.

COGS represents the direct costs of producing goods sold by a company.

Carrying costs add to the expenses of holding inventory over time.

EOQ calculates the ideal order quantity to minimize total inventory costs.

Safety stock acts as a buffer against unexpected increases in demand or delays in supply.

JIT reduces costs by ordering inventory only when needed, minimizing excess inventory.

LIFO assumes that the most recently purchased items are sold first, leaving older inventory.

High inventory turnover indicates efficient sales and can lead to higher profitability.

ABC analysis categorizes inventory items to prioritize management efforts based on their significance.

Category A contains high-value items that require close monitoring and control.

Deadstock refers to items that remain unsold due to low demand.

TCO focuses on the costs associated with owning and managing inventory, excluding sales revenue.

Demand forecasting helps businesses anticipate customer demand to optimize inventory levels.

Higher ordering costs decrease the EOQ, as larger orders become less economical.

LIFO results in lower ending inventory values, leading to higher tax liabilities during inflationary periods.

Increased lead time variability necessitates higher levels of safety stock to account for potential delays.