Question 3 (b)

Value of stock by FIFO and the perpetual weighted average

7 marks

Time to write: About 14 minutes

From an older CBCS paper

Question

Question 3 (b) · 7 marks

Details of a spare part of Silver Mills are below:

1-1-2015	Opening Stock	Nil
1-1-2015	Purchases	240 units @ ₹ 30 per unit
15-1-2015	Issued for consumptions	120 units
1-2-2015	Purchases	480 units @ ₹ 40 per unit
15-2-2015	Issued for consumption	240 units
20-2-2015	Issued for consumptions	240 units
1-3-2015	Purchases	360 units @ ₹ 50 per unit
15-3-2015	Issued for consumptions	120 units

If the company follows the methods below, find out the value of stock as on 31-3-2015:

FIFO
Weighted Average Method

under Perpetual Inventory System. 7

Reworded from the university paper: names and figures differ, the task is the same. The original paper belongs to the University of Delhi. See DU's question bank.

Before you write

Read off the question and its marks

14 minfor 7 marks

Read from the question

(i)–(ii)2 items, each marked on its own: give each its share.
find outFormula first, then the working, then the answer with its unit (₹, %, units).

What the paper leaves open

The weighted average is the perpetual (moving) average, as the question says.

Write it in this order

Read the data; note exactly what is asked 1 min
1 FIFO 3½ marks 6 min
2 Weighted average 3½ marks 6 min
Check: arithmetic, units (₹, %), final answer underlined 1 min

Try it first. About 14 minutes for 7 marks. Write it out, then open the solution.

Solution

Hover or tap a marked figure, like 72,000, to see how it is made and where else it appears.

Under FIFO the earliest costs are issued first, with the same result under perpetual and periodic records; under the perpetual weighted average the average is recomputed after each receipt.

(i) FIFO

Date	Issued from	Balance in hand
1 Jan	received 240 @ 30	240 @ 30
15 Jan	120 @ 30	120 @ 30
1 Feb	received 480 @ 40	120 @ 30; 480 @ 40
15 Feb	120 @ 30 + 120 @ 40	360 @ 40
20 Feb	240 @ 40	120 @ 40
1 Mar	received 360 @ 50	120 @ 40; 360 @ 50
15 Mar	120 @ 40	360 @ 50

Stock on 31 March 2015 (FIFO) = 360 × 50 = ₹18,000.

(ii) Weighted average (perpetual)

Date	Transaction	Units	Rate (₹)	Issue cost (₹)	Balance units	Balance value (₹)
1 Jan	Purchase @ 30	240	30		240	7,200
15 Jan	Issue	120	30	3,600	120	3,600
1 Feb	Purchase @ 40	480	38		600	22,800
15 Feb	Issue	240	38	9,120	360	13,680
20 Feb	Issue	240	38	9,120	120	4,560
1 Mar	Purchase @ 50	360	47		480	22,560
15 Mar	Issue	120	47	5,640	360	16,920
Total issues				27,480

Stock on 31 March 2015 (weighted average) = 360 × 47 = ₹16,920.

Check: receipts 7,200 + 19,200 + 18,000 = 44,400 = issues 27,480 + closing stock 16,920.

Where the 7 marks sit

#	Component	Marks
1	FIFO	3.5
2	Weighted average	3.5
	Total	7

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