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Inventory valuation

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FA – FIA FFA › Inventory valuation

  • This topic has 3 replies, 2 voices, and was last updated 4 years ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • July 6, 2020 at 3:44 am #576084
    lchen
    Member
    • Topics: 17
    • Replies: 15
    • ☆

    Good mornig sir, sorry to bother you. I have question regarding to the inventory valuation using AVCO. There is a question in bpp text book which it uses the formula [ total cost/(opening quantity+quantity received)] to calculate the price per unit. I understood what the formula does. But I use the tradition method which you showed us in lecture but yields a different result. Here is the question:

    Buy 10units at 300 each
    Buy 12 units at 250 each
    Sell 8 units at 400 each
    Buy 6 units at 200 each
    Sell 12 units at 400 each

    The answer is 2057.12 and my result was 2007.29.

    Sorry for this long question but would be much appreciated if you could help me with it!

    July 6, 2020 at 9:42 am #576094
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54671
    • ☆☆☆☆☆

    2057.12 is calculated using the average cost of all units purchased. That is an acceptable method but is rarely if ever used in practice and is unlikely for the exam.

    The correct average cost method is as I explain in my lecture and does give your answer of 2007.29 which is the correct answer 🙂

    July 6, 2020 at 9:54 am #576097
    lchen
    Member
    • Topics: 17
    • Replies: 15
    • ☆

    Thanks for the explanation!

    July 6, 2020 at 2:40 pm #576131
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54671
    • ☆☆☆☆☆

    You are welcome 🙂

  • Author
    Posts
Viewing 4 posts - 1 through 4 (of 4 total)
  • The topic ‘Inventory valuation’ is closed to new replies.

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