AVCO

taralouise

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

N4T

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

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

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

Brilliant! Thank you for this, reckon ive got it now