Fairvalue Ltd is a wholesale distribution firm which has provided you with the following information from stores in relation to a particular product line – CRIS20 Dates Details Units Unit Price $ Value $ 08/3/12 Delivery from Manufacturer 500 10 5,000 12/3/12 Delivery from Manufacturer 100 11.20 1,120 17/3/12 Issued to sales 400 25/3/12 Delivery from Manufacturer 300 11.50 3,450 27/3/12 Issued to sales 250 Sales of 650 units @ $20 per item are recorded for the month. There is an opening stock of 250 units, valued at $2 000 at 1st March 2012. Required: a. Calculate the gross profit for the month of March 2012 using each of the following methods of inventory valuation: (i) FIFO. (ii) LIFO. (iii) Weighted average. b. Explain which inventory valuation is most relevant for decision making purposes.
Fairvalue Ltd is a wholesale distribution firm which has provided you with the following
information from stores in relation to a particular product line – CRIS20
|
Dates
|
Details
|
Units
|
Unit Price $ |
Value $ |
|
08/3/12
|
Delivery from Manufacturer
|
500
|
10
|
5,000
|
|
12/3/12
|
Delivery from Manufacturer
|
100
|
11.20
|
1,120
|
|
17/3/12
|
Issued to sales
|
400
|
|
|
|
25/3/12
|
Delivery from Manufacturer
|
300
|
11.50
|
3,450
|
|
27/3/12
|
Issued to sales
|
250
|
|
|
Sales of 650 units @ $20 per item are recorded for the month. There is an opening stock of 250
units, valued at $2 000 at 1st March 2012.
Required:
a. Calculate the gross profit for the month of March 2012 using each of the following methods
of
(i) FIFO.
(ii) LIFO.
(iii) Weighted average.
b. Explain which inventory valuation is most relevant for decision making purposes.
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