6 Iron Limited is a small manufacturing company. During the year to 31 December 2009 it has taken into stock and issued to production the following items of raw material, known as XY1:

Notes:
1 There were no opening stocks of raw materials XY1.
2 The other costs involved in converting raw material XY1 into the finished product (marketed as Carcleen) amounted to £7000.
3 Sales of Carcleen for the year to 31 December 2009 amounted to £20 000.
Required:

(a) Illustrate the following methods of pricing the issue of materials to production:
1 first-in, first-out (FIFO); and 2 continuous weighted average.

(b) Calculate the gross profit for the year using each of the above methods of pricing the issue of materials to production.

Transcribed Image Text:

Date 2009 Receipts into stock Issues to production Quantity Price per Total Quantity (litres) unit value (litres) January 200 2.00 400 February 100 April 500 3.00 1500 May 300 June 800 4.00 3200 July 400 October 900 5.00 4500 December 1400