ABC Ltd has the following inventory records for the month of January 20.20
January 1 Inventory on hand: 50 units at a cost of R10 per unit.
January 4 Purchased 90 units at a cost of R15 per unit.
January 10 Sold 65 units
January 20 Purchased 30 units at a cost of R20 per unit
January 26 Sold 40 units
What is the value of inventory on 31 January 20.20 if ABC uses the FIFO method of inventory valuation?
a.
R1 125
b.
R725
c.
R975
d.
R1 000
To calculate the value of inventory on 31 January 20.20 using the FIFO method, we need to first calculate the cost of goods sold and then subtract it from the total value of inventory.
1. Cost of goods sold:
- Sold 65 units on January 10:
Cost = 50 units * R10 + 15 units * R15 = R500 + R225 = R725
- Sold 40 units on January 26:
Sold units = 50 (from Jan 1) + 90 (from Jan 4) + 30 (from Jan 20) = 170 units
Remaining inventory = 170 units - 40 units = 130 units
Cost of goods sold = 130 units * R10 = R1300
Total cost of goods sold = R725 + R1300 = R2025
2. Value of inventory on 31 January 20.20:
- Remaining units = 50 (from Jan 1) + 90 (from Jan 4) + 30 (from Jan 20) - 40 (sold on Jan 26) = 130 units
- Remaining cost = 50 units * R10 + 90 units * R15 + 30 units * R20 = R500 + R1350 + R600 = R2450
Therefore, the value of inventory on 31 January 20.20 using the FIFO method is R2,450.
None of the multiple-choice options provided matches the calculated value.