Fifo

gareth1985

Hi there,

I just need a bit of help in getting the answers that are listed in the screenshot.

Thanks,

Gareth

dumutroba

Inventory balance 500x20=10000
Inventory purchased
1200x22=26400
2000x21=42000
Issues
1800kg
Fifo method
500x20=10000
1200x22=26400
100x21=2100
Total 1800 kg at a price 38500
Inventory left 500+1200+2000-1800=1900

Vickie30

Hi Gareth,

The company issues 1800 kilos and since we are using FIFO you start at the beginning...
You can use all of the first 500 kilos
You can use all of the first consignment of 1200 kilos
and 100 kilos of the second consignment, which totals to the 1800 kilos needed for production.
500 x £20 = £10000
1200 x £22 = £26400
100 x £21 = £2100
Total = £38500
You had 3700 kilos in total and you issued 1800 for production so that leaves you with 1900 left.
You used all kilos that cost £20 and £22, the second consignment was priced at £21, you still have 1900 kilos left of that consignment at that price so that is what you price your remaining inventory at.

Hope this helps!
Vickie

gareth1985

Thank you very much for the helpful replies. I have just got one last question, where does the 100 come from?

It just seems to pop up out of nowhere to me. Sorry about all the questions.

Vickie30

Not a problem ! So because you need 1800 kilos for production, the first batch of kilos is only 500, then the second batch is only has 1200, so you need 100 kilos out of the 2000 batch to make it up to 1800, does that make sense?

gareth1985

Ah okay I gotcha. 500 + 1200 = 1700, so it is 100 less from 1800. Nice one!

Cheers