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January 16, 2020 at 1:06 pm
Im a pro at avco now. Only thing is, in the notes answer you havent rounded up 14.476. So it threw me when i went through the notes, prior to listening to the lecture.
These lectures and notes have been fantastic.
October 9, 2017 at 11:14 pm
I am still unclear for ” Higher inventory meant higher profit”, because if inventory is higher we must be inccured more expenses, such as: inventory cost, loan interest cost if we loan money from the bank to buy inventory,etc…; this will increase your expense therefore i think the profit will be lower.
thank in your replys soon
John Moffat says
October 10, 2017 at 5:36 am
It is the purchases that are the expense – inventory is those purchases that have not been sold.
Suppose you buy goods for 1,000 and sell them all for 1,500. The profit is 500.
Suppose you buy goods for 1,000 but 200 of them are still left in inventory – that means that those that were sold had cost 800. If they are sold for 1,500 then the profit is 700.
That was the point I was trying to make. Certainly there are other costs involved such as interest cost, as you state, but that it separate from the point I was making in this lecture.
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