AAT Level 4 Budgeting - CBT Assessment 1 section 1.3

Lewisadams1995

Hi,

Just wondering if someone can help me work out:
'Closing finished goods inventory will be valued at the budget production cost per unit'

Thanks!

SandyHood

STEP ONE
Find the closing finished goods inventory in number of units. It might be given. If not, Opening Inventory of Finished Goods
+ Total Goods Produced
- Number of units sold
= Closing Inventory of Finished Goods (units)

STEP TWO
Find the total cost of goods produced. This is typically 3 figures
Material cost of production
+Labour cost of production
+Production Overhead
= Total Production Cost

STEP THREE
Find the production cost per unit

Total Production Cost ...................= Production cost per unit
Total Goods Produced

STEP FOUR
Multiply the Closing Inventory of Finished Goods (units) x Production cost per unit
= Value of Closing Inventory of Finished Goods

This is called the FIFO valuation method
All the cost of the opening inventory is assumed to be part of the cost of goods sold


Sandy
sandy@sandyhood.com
www.sandyhood.com