To calculate the cost per unit of the purchases made on the specified dates and the value of the closing inventory using the FIFO (First-In, First-Out) method, we'll follow these steps:
a) Calculate the cost per unit of the purchases
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Purchase on January 8, 2022
- Number of calculators purchased: 8
- Cost per calculator: R520
- Total cost of calculators: \(8 \times 520 = R4160\)
- Freight charges: R72
- Customs duties: R48
- Total additional costs: \(72 + 48 = R120\)
- Total cost for this purchase: \(4160 + 120 = R4280\)
- Cost per unit: \[ \frac{4280}{8} = R535 \]
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Purchase on January 20, 2022
- Number of calculators purchased: 10
- Cost per calculator: R495
- Total cost of calculators: \(10 \times 495 = R4950\)
- Packaging cost: R60
- Freight charges: R90
- Customs duties: R80
- Total additional costs: \(60 + 90 + 80 = R230\)
- Total cost for this purchase: \(4950 + 230 = R5180\)
- Cost per unit: \[ \frac{5180}{10} = R518 \]
Summary of Cost per Unit
- January 8 purchase cost per unit: R535
- January 20 purchase cost per unit: R518
b) Calculate the value of the closing inventory using the FIFO basis
Inventory Transactions Summary Before Closing Inventory Calculation:
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Beginning Inventory:
- 17 calculators at R8,500 total: \[ \frac{8500}{17} = R500 \text{ (per unit)} \]
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Purchases:
- January 8: 8 calculators at R535 (total: R4280)
- January 20: 10 calculators at R518 (total: R5180)
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Total Inventory Available for Sale:
- Starting (17 @ R500): R8,500
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- January 8: 8 @ R535: R4,280
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- January 20: 10 @ R518: R5,180
- Total Inventory Cost: R17,960
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Sales Transactions:
- January 12: Sold 9 calculators at R600 each (sold from pre-FIFO stock).
- January 28: Sold 15 calculators for cash (FIFO basis applied).
Total Units Sold:
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Total calculators available for sale:
- Beginning: 17
- January 8 purchase: 8 (total: 25)
- January 20 purchase: 10 (total: 35)
Total of 35 calculators available.
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Total sold:
- Sold on January 12: 9 calculators
- Sold on January 28: 15 calculators
- Total Sold = 9 + 15 = 24 calculators
Calculating the Remaining Inventory:
- Remaining Inventory after sales = 35 - 24 = 11 calculators left.
Closing Inventory Calculation using FIFO:
- The first 17 units were the initial stock at R500.
- The next 8 units from January 8 are at R535 each.
- The following 10 units from January 20 are at R518 each.
Calculating according to FIFO (from oldest inventory to newest):
- 17 calculators from beginning stock (R500):
- 17 calculators remaining from starting inventory
- Sold 9 calculators to get to the remaining stock of beginning inventory (we still take R500).
- Next, we have 8 remaining from January 8 at R535 each and, thus 3 calculators must be taken from January 20 at R518.
Value of Closing Inventory:
The respective values:
- 2 from R500 (2 x 500) = R1,000
- 8 from R535 = R4,280
- 1 from R518 (1 x 518) = R518
Total value calculation:
- Total: \[ 1,000 + 4,280 + 518 = R5,798 \]
Final Closing Inventory Value
- Thus, the value of the closing inventory using the FIFO basis is R5,798.