Use the Following to Answer Questions

question 20

Multiple Choice

Use the following to answer questions:
Scenario 12-2. Jeremy's Jewels is a retail store that specializes in medium-quality, medium-priced jewelry. It is located in a mall in downtown Yosako, Kansas. Jeremy is concerned about his inventory costs. He has several questions concerning purchasing, choosing suppliers, and how much inventory he actually needs. Lately, his cash flow has been severely strained due to the fact too much cash is being tied up in inventory. Jeremy is currently the only employee of his small business.
-In Scenario 12-2 above, an important factor for Jeremy in considering his inventory needs is which of the following?

• A) The time period it takes to receive new inventory
• B) The obsolescence of the inventory
• C) Shrinkage
• D) Storage costs

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Definitions:

Weighted-Average Method

An inventory valuation method that calculates the cost of goods sold and ending inventory based on the average cost of all similar items in inventory.

Equivalent Units of Production

A concept in cost accounting used to allocate production costs to units produced, accounting for partially completed units by converting them into an equivalent number of fully completed units.

Conversion Costs

The combined costs of direct labor and manufacturing overhead involved in converting raw materials into finished products.

Weighted-Average Method

A cost accounting method that assigns an average cost to each unit of inventory by weighting the costs of similar items.