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INVENTORY METHODS The following information has been extracted from the accounting records of FURNITURE MART in...

INVENTORY METHODS
The following information has been extracted from the accounting records of

FURNITURE MART in respect of basic fridge unit stocks for June 2017.

Date JUNE

Details

No. of Units

Cost per unit

Total R

01

Opening inventory

5

R 1 400

7 000

07

Purchase from supplier

7

R 1 400

16

Purchase from supplier

4

R 1 500

25

Purchase from supplier

2

R 1 600

30

Sales for the month

15

---------

m

Required:

  1. 1.3.1 Calculate the number of units in the closing inventory.

  2. 1.3.2 Calculate the value of the closing inventory using the FIFO METHOD

  3. 1.3.3 Calculate the value of the closing inventory using the WEIGHTED AVERAGE METHOD.

(1 mark)

Solutions

Expert Solution

Ans 1.3.1 :- Calculation of number of units in the closing inventory:

Opening Inventory 5 units

Add: Purchased from supplier on 7 June 7 units

Add:   Purchased from supplier on 16 June 4 units

Add:   Purchased from supplier on 25 June 2 units

Less: sales for the month 15 units

Closing Inventory(No. of units) 3 units

Ans 1.3.2 :- Calculation of value of closing inventory using FIFO method:

FIFO or First In First Out method means selling out the goods from the inventory which is purchased first.

Total sales for the month :- 15 units

Less: Opening Inventory 5 units

Less: Inventory purchased on 7 June 7 units

Less: Inventory purchased on 16 June 3 units

0

Closing Inventory of 16 June : 1 unit of R 1500 each = 1500

Closing Inventory of 25 June : 2 units of R 1600 each = 3200

Therefore, value of closing inventory using FIFO method = 4800

Ans 1.3.3: Calculation of value of closing inventory using WEIGHTED AVERAGE METHOD:-

Units in hand Purchases Sales Inventory Total cost
Opening Inventory(R 1400 each) 5 units -- --

7000
Add Purchases ( R 1400 each) 7 units 9800 -- 16800
Add Purchases (R 1500 each) 4 units 6000 -- 22800
Add Purchases (R 1600 each) 2 units 3200 -- 26000
Less sold 15 units
Closing Inventory 3 units

Total cost of purchases (7000+9800+6000+3200) = 26,000

Total units purchased including opening inventory (5+7+4+2) = 18 units

weighted average cost per unit = 26,000/18units = 1444.44

Therefore value of closing inventory = 3 units*1444.44 per unit = 4333.33/-

ekkarill92 answered 1 year ago
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