Home For AAT student members AQ 2013 AAT Level 4 (Level 8 in Scotland)
Current updates regarding coronavirus (Covid-19) and the precautions AAT are taking will be continually updated on the below page.

Please check this link for the latest updates:
We hope you are all safe and well and if you need us we will be here. 💚

Calculating AVCO Method in Financial Statements

Katie2014Katie2014 New MemberMAAT, AAT Licensed Accountant Posts: 29
Hi, I was hoping someone could help me to understand how to calculate one of the questions from the AAT's 2nd Practice Assessment. The question says:

Hereford values inventories at the Weighted Average Cost Method (AVCO). At 1 July 20X0 there were 50 units in inventory valued at £8 each. On 9 March 20X1 30 units were purchased for £12 each and on 12 May 20X1 a further 20 units were purchased for £15 each. On 27 June 20X1 40 units were sold for £18 each. What is the value of closing inventory at 30 June 20X1? The answer is £636 however I cannot work out how to calculate it. If possible could someone please help?

Thank you.


  • Lucy_MLucy_M Feels At Home Registered Posts: 136
    Hi, AVCO is the total amount spent divided by the total goods bought so:

    50 x £8 = £400
    30 x £12 = £360
    20 x £15 = £300
    Grand total of 100 @ £1060 .

    £1060 / 100 = £10.60 each.

    40 sold @ £10.60 each is £424.

    Therefore the value of the closing inventory is £1060 - £424 = £636.

    (Be careful, if there is more than one sale, to take it a step at a time!)

    Hope that helps?


  • Katie2014Katie2014 New Member MAAT, AAT Licensed Accountant Posts: 29
    Hi Lucy, thank you for your help with this. As the question said that 40 units were sold at £18 each, it completely threw me!

    Thank you.

Sign In or Register to comment.