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Dear Sir,
Pls help me understand the following question with calculations:
A company has decided to switch from using the FIFO method of inventory valuation to using the average cost method (AVCO).
In the first accounting period where the changes is made, opening inventory by the FIFO method was $ 53,200. Closing inventory valued by the AVCO method was $ 59,800.
Total purchases and during the period were $136,500. Using AVCO method, opening inventory would have been at $ 56,200.
What is the cost of materials that should be included in the statement of profit or loss for the period?
Because they have changed their accounting policy, they should calculate as though the opening inventory was valued using AVCO as well.
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