Hello sir Is it possible using the same method in solving FIFO and AVCO question that we have learnt in MA in solving FA, FIFO and AVCO question and being correct?
Just a quick question regarding FIFO as I do not undarstand why units bought on the 25th & 20th November have been used rather than the ones bought first i.e on the 10th & 20th of November.
Since the assumption is that those purchased first are also sold first, the remaining units in inventory will always be the most recently purchased, i.e. units will be valued at the cost of the latest purchase/s since these will be the unsold units.
I thought that FIFO means first in first out and units purchased first i.e on the 10th November will be sold first but it seems that in the above exapmle units last bought i.e 25th November were sold first but this method is called LIFO as far as I remember.
FIFO does mean first in, first out. So when an order is received and units are sold, the ‘first in’ are sold, leaving the ‘last in’ in inventory. Remember the purpose of the exercise is to value inventory remaining, not the units sold.
Since the ‘last in’ are not being sold, they are valued as the remaining inventory.
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Hello sir
Is it possible using the same method in solving FIFO and AVCO question that we have learnt in MA in solving FA, FIFO and AVCO question and being correct?
Hi Hilamu,
The FIFO & AVCO methods are the same whether in FA or MA. I’m not sure there is any difference as long as you get the answer right.
Hi John,
Just a quick question regarding FIFO as I do not undarstand why units bought on the 25th & 20th November have been used rather than the ones bought first i.e on the 10th & 20th of November.
Can you please advise?
Many thanks
Hi Anya,
Since the assumption is that those purchased first are also sold first, the remaining units in inventory will always be the most recently purchased, i.e. units will be valued at the cost of the latest purchase/s since these will be the unsold units.
Hi Maxcw,
I thought that FIFO means first in first out and units purchased first i.e on the 10th November will be sold first but it seems that in the above exapmle units last bought i.e 25th November were sold first but this method is called LIFO as far as I remember.
Hi Anya,
FIFO does mean first in, first out. So when an order is received and units are sold, the ‘first in’ are sold, leaving the ‘last in’ in inventory. Remember the purpose of the exercise is to value inventory remaining, not the units sold.
Since the ‘last in’ are not being sold, they are valued as the remaining inventory.
Hi sir,
There is an error at the end of the calculation. 600 – 100 is 500 and the $8,686 is divided by the 500.