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@johnmoffat Opening inventory. 100 units, $ 2.52/unit
4 August, Sales – 20 units
8 August, purchases- 140 units $ 2.52/unit
10 August, sales – 90 units
18 August, purchases – 200 units $ 2.78/unit
20 August, sales – 180 unitsThe periodic weighted average for the month is calculated as follows:
Total value of inventory (opening inventory plus purchases costs during the month) divided by total units (opening inventory plus purchase costs during the month).
Which of the following statements is true?
A. Closing inventory is $ 19.50 higher when using the FIFO method instead of the periodic weighted average (Correct Answer)I don’t know where you got this question from, but either you have mistyped something or the answer is not correct. (Are you sure that the opening inventory and the 8 August purchases were both at $2.52 a unit??
There are 150 units left in inventory at the end of the month.
Using FIFO it is assumed that they were all from the latest purchase on 18 August, and so they will be valued at $2.78 a unit. Total value is 150 units x $2.78 = $417
The question has defined the way that average cost is to be calculated (which is not the same as is normal for AVCO).
It says to take the total value of the purchases and divided by the total units purchased (either you have mistyped here or the question is dreadfully poor). The total units purchased (+ op inv) are 100 + 140 + 200 = 440
The total cost is (100 x 2.52) + (140 x 2.52) + (200 x 2.78) = $1160.80. So cost per unit is 1160.80/440 = $2.64
So value of closing inventory is 150 x 2.64 = $396FIFO value is higher by $21
(If you want me to answer questions then ask them in the F2 Ask ACCA Tutor Forum – I am not always able to look at the general F2 forum)
Yes, John you right, there is a mistake in writing – 8 August purchases 140 units @ $ 2.56/ unit not 2.52/unit. Remaining question is correctly typed from Kaplan kit Question # 52.
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