ACCA Applied Knowledge · Management Accounting · Accounting for material, labour and overheads
Zenith Ltd holds 100 units of material X in opening inventory at $5 each. It then buys 200 units at $6 each. It issues 150 units to production. Using FIFO, what is the cost of the material issued?
The issue costs $800. Under FIFO the oldest inventory is used first, so the 100 opening units at $5 ($500) are issued, followed by 50 units from the later delivery at $6 ($300), totalling $800.
- A$750
- B$800Correct
- C$850
- D$900
Explanation
FIFO issues the oldest stock first: 100 units × $5 = $500, plus 50 units × $6 = $300, giving $800. $850 is the AVCO figure (average $5.667 × 150). $900 wrongly prices all units at the latest price of $6.
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