AVCO

taralouise
taralouise Registered Posts: 16
in AAT Level 4 (Level 8 in Scotland)
Hi everyone...

I am having a little trouble working out the closing inventory for AVCO.

An example question below.

Units
1500 and the cost is £3000
1600 and the cost is £3520
1900 and the cost is £4275

4000 units issued

The total of units come to 5000 and the total cost is 10795 so dividing these by each other gives me 2.159 x units issued 4000 = £8636 which is the cost of issue.

Now, where to go from here to work out the closing inventory.... any help is much appreciated!

Thanks :)

Comments

  • N4T
    N4T Registered Posts: 191
    It has still got to be 2.159 as it is average cost.

    To check....1000 units left costing £10795-£8636 = £2159........therefore closing inventory 1000 units @ £2159/1000 units = £2.159 per unit
  • taralouise
    taralouise Registered Posts: 16
    Hi thank you for the above... sorry, I missed out the other part of the question.

    After the 4000 issue there is further receipts for 1000 units and the cost is £2750 and it asks what the closing inventory is.

    Hope you can help :)
  • N4T
    N4T Registered Posts: 191
    Balance after the issue 1000 units at total cost £2159
    Receipts of 1000 units at total cost £2750

    Now do what you did as before and add these together...
    Closing inventory 2000 units at total cost £4909

    If it's asked for, £4909/2000 = £2.4545 per unit

    It's that simple, AVCO is the easiest one of the three as you don't need to put the figures in a table to work it out.
  • taralouise
    taralouise Registered Posts: 16
    Brilliant! Thank you for this, reckon ive got it now :)

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