stock issue in masterclass

System
System Posts: 100,534 🤖 Admin 🤖
edited June 18 in AAT student discussion
Can anyone explain the way the stock is bought into the masterclass answers. When I did it, I ignored the stock and did just for production of units given, giving me a £6020 variance, not the £9000 thats in the answers. My operating statement still reconciled because I ignored the stock from that too!<BR><BR>Also, second question about how the answer might look ....blah (forgotten the actual wording). Can anyone explain a possible answer to this too?<BR><BR>Any help would be much appreciated, thank you!

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  • System
    System Posts: 100,534 🤖 Admin 🤖
    stock issue in masterclass

    This is exactly how I did it initially and was convinced I was right because it reconciles. The key is to note that closing stock should be valued at standard cost. The following notes may help.<BR><BR>Actual paper purchased is 450,000m less 301,000m used = 149,000m closing stock<BR>149,000m @ standard cost of £0.10 = £14,900 being the value of the closing stock.<BR> <BR>If we know we paid £54,000 for all purchases and we know we have £14,900 left we can calculate the value of the stock which has been used.<BR> <BR>£54,000 less £14,900 = £39,100<BR> <BR>Actual production costs are therefore<BR>Paper 39,100<BR>Ink 13,440<BR>Labour 26,568<BR>Production o/h 69,250<BR> <BR>Total costs £148,358<BR> <BR>When you come to the Material variances relating to the paper the usual formula will change a little to reflect the closing stock valuation. We are not including all purchases made but we do need to reflect the actual cost of the paper used and not value this at the same as the closing stock. So:<BR> <BR>Usage variance is as before.<BR> <BR>Price variance is normally (Actual quantity used @ standard cost per m) less Actual cost <BR>To incorporate the standard value of stock this has to change slightly<BR>(Actual quantity used @ standard cost) less (Total cost of purchases less value of closing stock)<BR>(301,000m @ £0.10) less (£54,000 less £14,900) = £9,000A<BR> <BR>This brings the total paper variance to £8,800A which when all other variances are included will reconcile to standard absorption cost of actual production of £129,300.00.<BR> <BR>Hope this hasn't confused things further but I know how frustrated I was getting over this. If anyone disagrees with my workings please feel free to let me know.<BR><BR>
  • System
    System Posts: 100,534 🤖 Admin 🤖
    stock issue in masterclass

    thank you, i will try and redo this to see if i can make it work!<BR><BR>

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