Question

1.3. INVENTORY METHODS
The following information has been extracted from the accounting records of

FURNITURE MART in respect of basic fridge unit stocks for June 2017.

Date JUNE	Details	No. of Units	Cost per unit	Total R
01	Opening inventory	5	R 1 400	7 000
07	Purchase from supplier	7	R 1 400
16	Purchase from supplier	4	R 1 500
25	Purchase from supplier	2	R 1 600
30	Sales for the month	15	---------

m

Required:

1. 1.3.1 Calculate the number of units in the closing inventory.

2. 1.3.2 Calculate the value of the closing inventory using the FIFO METHOD

3. 1.3.3 Calculate the value of the closing inventory using the WEIGHTED AVERAGE METHOD.

(1 mark)

(2 marks) (3 marks)

Answer 1

The answer has been presented in the supporting sheet. All the parts has been solved with detailed explanation and format. For detailed answer refer to the supporting sheet.

E A B C D Answer 2 Part 1) 3 Number of units in ending inventory 4 = Total units available for sale - units sold 5 = (5+7+4+2)-15 6 = 3 Units 7 Thus the units in ending inventory = 3 Units 9 Part 2) 10 The value of ending inventory under FIFO 11 = units in ending inventroy * cost as per FIFO 12 = (2*1600) + (1*1500) 13 = $ 4700 14 Thus the correct answer 15 Value of ending inventroy FIFO = $ 4700 17 Part 3) 18 Firstly we have to calculate the average cost 19 = total cost of goods available for sale / no. of units available for sale 20 = ((5*1400)+7*1400)+(4*1500)+(2*1600))/18 21 = $1444.44 Per unit 23 The value of ending inventory under Weighted average 24 = units in ending inventroy * average cost 25 = 3*1444.44 26 = $ 4333.32 27 Thus the correct answer 28 Value of ending inventroy average = $ 4333.32