Gross profit Using, separately, the weighted average and the FIFO methods of inventory valuation
A firm has the following transactions with its product R
Year 1
Opening stock: nil
Buys 10 units at GHc 300 per unit
Buys 12 units at GHc 250 per unit
Sells 8 units at GHc 400 per unit
Buys 6 units at GHc 200 per unit
Buys 12 units at GHc 400 per unit
Year 2
Buys 10 units at GHc 200 per unit
Sells 5 units at GHc 400 per unit
Buys 12 units at GHc 150 per unit
Sells 25 units at GHc 400 per unit
Required:
Calculate for both year 1 and year 2 the value of
i. Gross profit
Using, separately, the weighted average and the FIFO methods of
FIFO and Weighted average methods are inventory control & valuation methods. In FIFO inventory is dispatch on First in and first out basis whereas in weighted average method we the average rate to dispatch the inventory.
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