The management of Saturn Enterprises currently uses a periodic inventory valuation system based on FIFO assumptions. They have been advised that a perpetual inventory valuation system based on the Average Cost method would provide useful advantages such as smoothing out fluctuations in prices, therefore making it easier to use the data for decision-making. Furthermore, it would be easier to administer than FIFO because there is no need to identify each batch separately. They would like an illustration of the impact of using the AVCO method and provided the following data for an inventory item for 2021 January:

Movements of Stock Item SK24 for the month of January

Details	Quantity/Units	Unit Cost ($)	Total Cost ($)
Jan 01 Opening balance	50	40	2 000
Jan 04 Receipts	200	50	10 000
Jan 10 Issues	150
Jan 15 Receipts	300	60	18 000
Jan 20 Issues	300
Jan 25 Receipts	200	46.5	57 000
Jan 30 Issues	240

During the month, Saturn incurred the following additional costs:

i. Utilities $15 750

ii. Wages and salaries $90 000 iii. Insurance $16 000

Note: On January 31, $2 250 was owing for utilities and $2 500 was prepaid for insurance. One unit was sold for $250.

1. Assuming that Saturn Enterprises uses the AVCO method, write up the ledger card showing values of receipts, issues and closing stock for January.

2. Prepare a summary showing a profit or loss made from selling item SK24.

3. Distinguish between perpetual and periodic stocktaking systems.

The key distinction between periodic and perpetual inventory systems is that the perpetual system keeps a continuous record of inventory transactions, whereas the periodic system only keeps track of them at the end of the month.

The management of Saturn Enterprises currently uses a periodic inventory valuation system based on FIFO assumptions. They have been advised that a perpetual inventory valuation system based on the Average Cost method would provide useful advantages such as smoothing out fluctuations in prices, therefore making it easier to use the data for decision-making. Furthermore, it would be easier to administer than FIFO because there is no need to identify each batch separately. They would like an illustration of the impact of using the AVCO method and provided the following data for an inventory item for 2021 January:

Movements of Stock Item SK24 for the month of January

Details	Quantity/Units	Unit Cost ($)	Total Cost ($)
Jan 01 Opening balance	50	40	2 000
Jan 04 Receipts	200	50	10 000
Jan 10 Issues	150
Jan 15 Receipts	300	60	18 000
Jan 20 Issues	300
Jan 25 Receipts	200	46.5	57 000
Jan 30 Issues	240

During the month, Saturn incurred the following additional costs:

i. Utilities $15 750

ii. Wages and salaries $90 000 iii. Insurance $16 000

Note: On January 31, $2 250 was owing for utilities and $2 500 was prepaid for insurance. One unit was sold for $250.

1. Assuming that Saturn Enterprises uses the AVCO method, write up the ledger card showing values of receipts, issues and closing stock for January.

2. Prepare a summary showing a profit or loss made from selling item SK24.

3. Distinguish between perpetual and periodic stocktaking systems.

The key distinction between periodic and perpetual inventory systems is that the perpetual system keeps a continuous record of inventory transactions, whereas the periodic system only keeps track of them at the end of the month.