Inventory and Cost Control Flashcards

A veterinary practice's cost of goods sold (COGS) is $180,000 and net revenue is $450,000. What is the COGS percentage?

Answer: 40%

COGS percentage = ($180,000 / $450,000) × 100 = 40%.

Which inventory valuation method assumes that the most recently purchased items are sold first?

Answer: LIFO

LIFO (Last In, First Out) assumes the most recently purchased items are the first to be sold.

What is the primary purpose of an ABC inventory analysis in a veterinary practice?

Answer: Categorize inventory by value to prioritize management effort

ABC analysis categorizes inventory into A (high-value), B (moderate), and C (low-value) items to focus management effort where it matters most.

A drug has a unit cost of $12 and the practice applies a standard markup of 100%. What is the dispensing fee if the final client charge is $30?

Answer: $6

100% markup on $12 gives a selling price of $24; a $30 charge means the dispensing fee is $30 − $24 = $6.

Which term describes the minimum quantity of an item that should be on hand before a reorder is triggered?

Answer: Reorder point

The reorder point is the inventory level at which a new purchase order should be placed to avoid stockouts.

Shrinkage in a veterinary pharmacy inventory most commonly results from which of the following?

Answer: Theft, breakage, expiration, and dispensing errors

Shrinkage refers to inventory losses from theft, breakage, product expiration, and dispensing discrepancies.

When a vendor offers a 2/10 net 30 payment term, what does '2/10' mean?

Answer: A 2% discount if paid within 10 days

2/10 net 30 means the buyer receives a 2% discount if the invoice is paid within 10 days; otherwise the full amount is due in 30 days.