Self-test Eastwood plc is a manufacturing company which prepares annual accounts to 31 July. On 1 July 2002, the company had a stock of 13,000 units of raw material X.

These units had cost £6 each. During July 2002, purchases and sales of material X were as follows:

Bought Sold 7 July 8,000 units at £7 each 10 July 12,000 units 18 July 15,000 units at £8 each 25 July 20,000 units 30 July 3,000 units at £10 each The stock of Eastwood plc at 31 July 2002 also included 1,000 units of product Y.

These units had been manufactured by the company in late July but were not complete at the year-end. Manufacturing costs of £11,500 had been incurred in relation to these units so far and it was anticipated that further costs of £3,400 would be necessary in order to complete production. The units had an estimated selling price of £18,000. When the units were sold, the company would incur delivery costs of £500 and selling expenses amounting to 5% of selling price.

Requirement for question

(a) Calculate the cost of the closing stock of raw material X at 31 July 2002, using each of the following stock valuation methods:
(i) FIFO (ii) LIFO (iii) AVCO.

(b) Explain how the cost and net realisable value of a manufactured item are calculated.

(c) Calculate the value at which the 1,000 units of product Y should be shown in the financial statements of Eastwood plc at 31 July 2002.
(CIPFA Financial Accounting Foundation Stage December 2002)