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On 1st June there were 3600 units of inventory component H valued at price of $5 each. The following receipts and issues were recorded during June:
5 June Receipts = 5000 units @ 5.7
13 June receipts = 3000 units @ 6.10
25 June Issues = 9000 unitsUsing FIFO what is the total value of the units issued on 25th June?
I am not sure what receipts and issues mean and consequently how to work this out.
Available answers = A)52,900, B)48,940 C)50,310 D)51,800
Kindly advise
Hi Steven,
Receipts will be when you get more (receive) inventory and issues will be when you give out inventory (i.e. a reduction in inventory level). FIFO values inventory issued in the order it was received. So the 9000 issued on 25 June will be assumed to be all 5000 units received on 5th June( as it was first in so is first out) and the remainder of 4000 units comes from the inventory received on the 13th off June.
Calculation:
5,000 units @5.7 = 28,500
+ 4,000 units @ 6.10 = 24,400
28,500 + 24,400 = 52,900Kirsty: Please do not answer in this forum – it is Ask the ACCA Tutor, and you are not the tutor (and your answer is not correct).
Steven:
Kirsty’s answer has the correct idea. However since there were 3.600 units in inventory at the start of the months, when we come to issue the 9,000 they come first from those 3,600. That leaves another 5,400 (9,000 – 3.600). They come from the next earliest receipt. So 5,000 of them come from the receipt on 5 June. That leaves 400 (5,400 – 5,000) and they are bought on the next earliest receipt, which was on 13 June.
So, the value is as follows:
3,600 x $5 = 18,000
5,000 x $5.70 = 28,500
400 x $6.10 = 2,440So the total is $48,940
Sorry John, didn’t realise only tutors could reply- don’t normally use the forums. I had an email from open tuition asking us to try and answer questions from students that had no responses yet. I just clicked a link and it took me through to a list which included this topic.
what if we have 200 to 300 products and which are all different?we still use fifo for each product?
if not then what do we use to value the items and how can we calculate the COGS and stock in hand?
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