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Yes, they are up to date. Please use them in conjunction with the lecture videos.
When prices are falling throughout the year, using FIFO (First-In, First-Out) means that the older, higher-priced inventory is sold first. This results in:
Higher Cost of Goods Sold : Since the older, more expensive inventory is being used up first, the cost of goods sold will be higher.
Lower Profit: With a higher cost of goods sold, the profit will be lower.
Lower Closing Inventory Value: The remaining inventory is valued at the more recent, lower prices.
Therefore the answer is B. Hope this helps.
I am curious where you obtained the question. A problem I have spotted in the numbers you have given is that the average usage per day at 100 is less than the minimum usage per day. This seems nonsensical.
Re-order level + re-order quantity -(minimum usage × minimum lead time)
Reorder level- this needs to cover maximum demand together with longest lead time to ensure no stockouts.
Reorder level = 400x 5= 2000
Substituting the values into the first equation gives
2000 + 2200 – (2 x 200)
4400 – 400 = 4000 is the maximum level of stock.
Usually with these types of questions, you work out the EOQ as normal and then determine whether it is worthwhile to take advantage of discounts offered. If it is required that more needs to be ordered than the EOQ to receive a discount then this will impact the costs. Since more stock will be held the holding cost will increase. Since fewer orders will have to be made the overall ordering cost will decrease. A balance must be struck between all the relevant factors to find the optimal order quantity.
The variable overhead cost is not relevant to this specific calculation because it would be treated the same way under both absorption and marginal costing methods. The key difference lies in the treatment of fixed production costs for unsold units. Hope this helps.
Anyone coming across this thread, please see here for the answer-
If you want to ask the tutor something directly, please use the following forum-
Hope this helps.
Only costs and revenues impacted by the decision at hand should be considered relevant.
I didn’t include it as it would be paid anyway. It’s therefore not a relevant cost.
Original poster, welcome to the Opentuition forums. Please see the following thread-
https://opentuition.com/topic/acca-advanced-taxation-atx-2/
Hope this helps.
