ACCA MA · Guided practice (Show me how)
Chapter 5: Ordering and Accounting for Inventory
Valuing inventory: FIFO, LIFO and weighted average
There are three methods used for the valuation of closing inventory in management accounting: FIFO, LIFO and weighted average. Each of them values the SAME physical inventory differently, because each makes a different assumption about which costs leave the stores first.
JM Ltd had the following material transactions during November:
Opening balance, 1 November: 20 units at $4.00 per unit.
Receipt, 8 November: 140 units at $4.40 per unit.
Issue, 12 November: 80 units.
Receipt, 18 November: 100 units at $4.60 per unit.
Issue, 26 November: 140 units.
The stores ledger is kept continuously: a running balance is struck after every receipt and every issue. Work to the nearest cent.
(a) FIFO
Calculate the closing inventory value at the end of November using FIFO, showing the cost of each issue.
(b) LIFO
Calculate the closing inventory value at the end of November using LIFO, showing the cost of each issue.
(c) Cumulative weighted average cost
Calculate the closing inventory value at the end of November using the cumulative weighted average cost.
Opening this exercise…