Beta Ltd commenced business on 1 Januar y and is making up its first year’s accounts. The company uses standard costs. The company own a variety of raw materials and components for use in its manufacturing business. The accounting records show the following:

Raw materials control account balance at year-end is £30,000 (at standard cost).
Required:
The company’s draft balance sheet includes ‘Inventories, at the lower of cost and net realisable value £80,000’. This includes raw materials £30,000: do you consider this to be acceptable? If so, why? If not, state what you consider to be an acceptable figure.

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Standard cost of purchases Price variance Adverse (favourable) variances Usage variance July 10,000 800 (400) August September 12,000 1,100 100 9,000 700 (300) October 8,000 900 200 November 12,000 1,000 300 December 10,000 800 (200) Cumulative figures for whole year 110,000 8,700 (600)