Budgeting (AQ 2013) - Sample Assessment 1, Task 1.3 (b)
thebigalbowski
Registered Posts: 2
Hello all. I am wondering if somebody could help me with Task 1.3 (b) with regards to Sample Assessment 1 for Budgeting. My mind has gone blank.
In the Operating Budget, the 'Closing inventory of finished goods' is £179,080 and the Cost of goods sold is £1,266,720. How are these both worked out?
Thank you for your help
In the Operating Budget, the 'Closing inventory of finished goods' is £179,080 and the Cost of goods sold is £1,266,720. How are these both worked out?
Thank you for your help
0
Comments
-
You need to establish whether FIFO or AVCO is being used to value the inventory.
I think this question says cost of purchases should be used. In other words, the opening inventory value is used in production along with some of the purchased inventory and all the closing inventory is valued at the cost per unit purchased in the period.
Does that make sense?
Sandy
sandy@sandyhood.comSandy
sandy@sandyhood.com
www.sandyhood.com0 -
To find cost of goods sold you add up the values for opening inventory and purchases, and take off the closing inventory. This approach works whether FIFO or AVCO is used.
SandySandy
sandy@sandyhood.com
www.sandyhood.com1 -
Hi Sandy
Yes, this makes sense. Thank you very much for your help0 -
Hi,
Did you find out how to get the closing inventory of 'Closing inventory of finished goods' is £179,080? I am having a blackout, very stuck on this one. Any help is appreciated. Thank you :-)0 -
Patricia
- work out the purchase cost per kg (or litre)
- find the physical number of kgs in the closing inventory
- multiply the number of kgs by the cost per kg
Sandy
sandy@sandyhood.com
www.sandyhood.com0 - work out the purchase cost per kg (or litre)
-
Sandy, thank you
Please see below how I did:
purchase price: 598000/460000=1.3
closing inventory of finished goods = 81,400 x1.3=105820
material closing inventory = 68250 x1.3= 88725
Still not getting £179080, can you please show me what I am doing wrong?0 -
Patricia
Don't muddle up raw materials with finished goods.
Look at your posting. How can finished goods be worth the same per unit as materials that haven't been worked on?
Finished goods inventory is valued using cost of production.
Unlike you I cannot access the questions, but I recall there being a small print note that closing inventory of finished goods was valued using the cost per unit produced.
Look at all the cost of production inputs: materials, labour and overheads and add them up. Then divide by the number produced. This gives you the cost of production on a per unit basis.
Find the closing inventory of finished goods (in units) and multiply by the cost per unit.Sandy
sandy@sandyhood.com
www.sandyhood.com0 -
i think its (total production cost / budgeted production level) x budgeted closing inventory of finished goods
1295800/589000 = 2.2 x 81400
= £179080
cost of sales then will be = 150000+1295800-179080= 12667200
Categories
- All Categories
- 1.2K Books to buy and sell
- 2.3K General discussion
- 12.5K For AAT students
- 319 NEW! Qualifications 2022
- 162 General Qualifications 2022 discussion
- 11 AAT Level 2 Certificate in Accounting
- 56 AAT Level 3 Diploma in Accounting
- 87 AAT Level 4 Diploma in Professional Accounting
- 8.8K For accounting professionals
- 23 coronavirus (Covid-19)
- 272 VAT
- 92 Software
- 273 Tax
- 135 Bookkeeping
- 7.2K General accounting discussion
- 200 AAT member discussion
- 3.8K For everyone
- 38 AAT news and announcements
- 345 Feedback for AAT
- 2.8K Chat and off-topic discussion
- 582 Job postings
- 16 Who can benefit from AAT?
- 36 Where can AAT take me?
- 42 Getting started with AAT
- 26 Finding an AAT training provider
- 48 Distance learning and other ways to study AAT
- 25 Apprenticeships
- 66 AAT membership