Question 2 (b)
Periodic FIFO for a month (petrol)
6 marks
- Time to write
- About 12 minutes
- Notes
- Crux notes
Question
Question 2 (b) · 6 marksBharat Fuels is a leading distributor of petrol. A detailed count of the petrol in hand is taken each time the books are closed at the end of a month. At the month end, the following information is available:
| Sales | ₹1,51,80,000 |
| General overheads cost | ₹ 3,50,000 |
| Inventory in the beginning | 1,20,000 litres @ ₹40 per litre |
| Purchases | |
| June 1 | 2,40,000 litres @ ₹38.50 per litre |
| June 30 | 1,20,000 litres @ ₹41.20 per litre |
| Closing inventory | 1,50,000 litres |
Using the periodic system and FIFO, compute the following as per AS-2:
The value of the inventory on June 30.
The amount of the cost of goods sold for June
The profit or loss for the month of June.
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
Read from the question
- (i)–(iii)3 items, each marked on its own: give each its share.
- computeFormula first, then the working, then the answer with its unit (₹, %, units).
What the paper leaves open
The paper gives sales as a total, not as litres sold or a selling price. The litres sold follow from the quantities: opening stock plus purchases less the closing count (3,30,000 litres in our version). Nothing else is left open.
Write it in this order
- Read the data; note exactly what is asked 1 min
- 1 (i) Closing inventory by FIFO 2 marks 3 min
- 2 (ii) Cost of goods sold 2 marks 3 min
- 3 (iii) Profit for June 2 marks 3 min
- Check: arithmetic, units (₹, %), final answer underlined 2 min
Try it first. About 12 minutes for 6 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 the periodic system, closing stock is counted at the end of the period and costed afterwards, rather than issues being costed as they happen. Under FIFO the oldest costs go out first, so the closing stock is made up of the most recent purchases; periodic and perpetual FIFO give the same result.
Litres sold: 1,20,000 + 2,40,000 + 1,20,000 − 1,50,000 = 3,30,000 litres.
(i) Value of the inventory on June 30: ₹60,99,000
The 1,50,000 litres in hand are the latest layers: all of the June 30 purchase, then the rest from June 1.
| Layer | Litres | Rate (₹) | Value (₹) |
|---|---|---|---|
| Purchase of June 30 | 1,20,000 | 41.20 | 49,44,000 |
| Purchase of June 1 (part) | 30,000 | 38.50 | 11,55,000 |
| Closing inventory | 1,50,000 | 60,99,000 |
(ii) Cost of goods sold for June: ₹1,28,85,000
| Particulars | Litres | Rate (₹) | Value (₹) |
|---|---|---|---|
| Inventory in the beginning | 1,20,000 | 40.00 | 48,00,000 |
| Purchases, June 1 | 2,40,000 | 38.50 | 92,40,000 |
| Purchases, June 30 | 1,20,000 | 41.20 | 49,44,000 |
| Goods available | 4,80,000 | 1,89,84,000 | |
| Less: closing inventory (i) | 1,50,000 | 60,99,000 | |
| Cost of goods sold | 3,30,000 | 1,28,85,000 |
Check by issuing the oldest layers first: 1,20,000 × ₹40 + 2,10,000 × ₹38.50 = ₹48,00,000 + ₹80,85,000 = ₹1,28,85,000.
(iii) Profit for the month of June: ₹19,45,000
| Particulars | ₹ | Particulars | ₹ |
|---|---|---|---|
| To Cost of goods sold | 1,28,85,000 | By Sales | 1,51,80,000 |
| To General overheads | 3,50,000 | ||
| To Profit for June | 19,45,000 | ||
| Total | 1,51,80,000 | Total | 1,51,80,000 |
Where the 6 marks sit
| # | Component | Marks |
|---|---|---|
| 1 | (i) Closing inventory by FIFO: ₹60,99,000 | 2 |
| 2 | (ii) Cost of goods sold: ₹1,28,85,000 | 2 |
| 3 | (iii) Profit for June: ₹19,45,000 | 2 |
| Total | 6 |
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