On 1 January Mr G started a small business buying and selling a special yarn. He invested his savings of £40000 in the business, and during the next six months the following transactions occurred:

The yarn is stored in premises Mr G has rented, and the closing stock of yarn, counted on 30 June, was 500 boxes.

Other expenses incurred, and paid in cash, during the six-month period amounted to

£2300.

Required:

(a) Calculate the value of the material issues during the six-month period, and the value of the closing stock at the end of June, using

.the following methods of pricing:

(i) first in, first out;

(ii) last in, first out;

(ili) weighted average (calculations to two decimal places only). 10 marks

(b) Calculate and discuss the effect each of the three methods of material pricing will have on the reported profit of the business, and examine the performance of the business during the first six-month period. 12 marks Total 22 marks ACCA Level I Costing

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Yarn purchases Total Yarn sales Total Date of quantity cost Date of quantity value receipt (box) () despatch (box) () 13 Jan 200 7 200 10 Feb 500 25 000 8 Feb 400 15 200 11 Mar 600 24 000 20 Apr 600 27 000 12 Apr 400 14000 15 June 500 14 000 25 June 400 15 200