Question
a. Jade Berhad is a manufacturer of plastic products. The company has consistently used FIFO (first-in, first-out) in valuing inventory, but it is interested to
a. Jade Berhad is a manufacturer of plastic products. The company has consistently used FIFO (first-in, first-out) in valuing inventory, but it is interested to know the effect on its inventory valuation of using weighted average cost instead of FIFO. At 31 December 2017 the company had inventory of 8,500 standard plastic tables, and has computed its value of the tables on the two bases as:
Basis Unit cost (RM) Total value (RM)
FIFO 20 170,000 Weighted average 22 187,000
During January 2018 the movements on the inventory of tables were as follows:
Date Number of unit Production Cost per unit Production: 8 January 4,200 18 22January 6,000 18
Revenue: Selling price per unit 12January 9,000 22 18January 1,500 20 24January 2,200 20 28January 4,700 20
Required: Compute the value of the inventory and gross profit at 31January 2018: a. Using weighted average cost. (15marks) b. Using First in First Out (FIFO) method. (15 marks)
Note: In arriving at the total inventory values you should make calculations to two decimal places (where necessary) and deal with each inventory movement in date order.
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