ACCA Applied Knowledge · Financial Accounting · Inventories
A company buys a product as follows: 1 March 100 units at $10 each; 10 March 200 units at $12 each. On 15 March it sells 150 units. Using FIFO, what is the cost of the closing inventory of 150 units at 15 March?
Closing inventory is $1,800. Under FIFO the 150 units sold consist of the 100 oldest units at $10 and 50 of the later units at $12, leaving 150 units valued at $12 each from the latest purchase.
- A$1,650
- B$1,800Correct
- C$1,500
- D$1,400
Explanation
FIFO issues the oldest first: 100 units at $10 plus 50 units at $12 are sold. Remaining are 150 units at $12 = $1,800. The $1,650 figure comes from using the average cost of $11 per unit instead of FIFO.
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