Abraham Phiri Enterprise Limited (APEL) has been importing and selling second hand motor vehicles from the Far East since 2008. The firm specialises in Toyota model vehicles. APEL also sells spare parts. Its clientele is comprised of both corporate and individuals. The delivery period is 90 days after placing an order. You have been asked by the chief executive officer to help in the accounting and valuation of inventory. On 31st December, 2021 inventory was 35 cars at an average purchase price of K40,000 per car. The CEO would like to know APEL’s performance for the year ending 31st December, 2022. The following information was made available: Purchases: Date Quantity (Units) Price (K/unit) February 12 30 51,400 March 25 50 52,800 April 14 40 53,100 May 05 25 54,000 August 16 20 55,250 September 29 35 57,300 October 08 15 58,350 Sales: Date Quantity (Units) Price (K/unit) February 2 25 61,500 February 15 25 61,750 March 30 50 62,200 April 15 50 62,455 May18 18 62,455 May 30 10 62,850 August 27 17 70,000 October 10 28 72,700 Required: Prepare the inventory valuation sheet for the year ending 31 December, 2022 using the following: First in Last in (FIFO), Last in first out (LIFO) and Weighted Average (AVCO) Prepare the profit statement using all the three methods above. APEL is reviewing its inventory control policy with regards to motor vehicles. You are told that the cost of making one order is K100, the cost of holding one unit for one year is K250 and the annual demand for motor vehicles is 300. There is neither lead time nor buffer inventory. Calculate the Economic order quantity (EOQ) and the annual holding costs and annual ordering costs using the EOQ.
Abraham Phiri Enterprise Limited (APEL) has been importing and selling second hand motor vehicles from the Far East since 2008. The firm specialises in Toyota model vehicles. APEL also sells spare parts. Its clientele is comprised of both corporate and individuals.
The delivery period is 90 days after placing an order. You have been asked by the chief executive officer to help in the accounting and valuation of inventory. On 31st December, 2021 inventory was 35 cars at an average purchase price of K40,000 per car. The CEO would like to know APEL’s performance for the year ending 31st December, 2022. The following information was made available:
Purchases:
Date |
Quantity (Units) |
Price (K/unit) |
February 12 |
30 |
51,400 |
March 25 |
50 |
52,800 |
April 14 |
40 |
53,100 |
May 05 |
25 |
54,000 |
August 16 |
20 |
55,250 |
September 29 |
35 |
57,300 |
October 08 |
15 |
58,350 |
Sales:
Date |
Quantity (Units) |
Price (K/unit) |
February 2 |
25 |
61,500 |
February 15 |
25 |
61,750 |
March 30 |
50 |
62,200 |
April 15 |
50 |
62,455 |
May18 |
18 |
62,455 |
May 30 |
10 |
62,850 |
August 27 |
17 |
70,000 |
October 10 |
28 |
72,700 |
Required:
- Prepare the
inventory valuation sheet for the year ending 31 December, 2022 using the following: First in Last in (FIFO), Last in first out (LIFO) and Weighted Average (AVCO) - Prepare the profit statement using all the three methods above.
- APEL is reviewing its inventory control policy with regards to motor vehicles. You are told that the cost of making one order is K100, the cost of holding one unit for one year is K250 and the annual demand for motor vehicles is 300. There is neither lead time nor buffer inventory. Calculate the Economic order quantity (EOQ) and the annual holding costs and annual ordering costs using the EOQ.
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