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Practice assessment on FIFO,LIFO AND AVCO.
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This is a practice assessment on FIFO, LIFO AND AVCO. It is recommended to do this after the tasks, and reading the handbook.
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Dumfries and Galloway CollegeBusiness, Accounting and Computing
Accounting for Business: An Introduction J56F 34
Assessment for Outcome 2
Assessment instructions
Hop-It run a perpetual inventory system to record all movements in and out of the stores and
the value of goods in inventory at any given time for the Easter Eggs they produce.
As part of your training, you work alongside the Warehouse Manager who asked you to
update some of the inventory ledger cards with transactions that have happened this week.
At the end of the month, once you have completed the inventory ledger cards and arrived at
the closing balance for each product, you should include these in the full inventory count
provided and total this for inclusion in the financial statements for the period.
Inventory ledger cards and the relevant inventory control documentation is provided on the
following tabs.
Goods Received Notes (GRN)
GRN No Date Product Quantity Price £ Details
Supplier:
6532 3/1/2022 EG01 175 kg 25.28 per kg Rollin Plc
Supplier:
6533 3/11/2022 EG17 220 kg 15.50 per kg Little Chicks Ltd
Supplier:
6534 3/17/2022 HP8 18 litres 45.75 per litre Fluffy Tails
Supplier:
6535 3/20/2022 EG01 350 kg 28.75 per kg Eggstatic Ltd
Material Requisition Notes (Stores Issue) MRN
MRN No Date Product Quantity Details
E258 3/2/2022 EG01 430 kg Job Ref: EST17
E259 3/8/2022 EG17 50 kg Job Ref: EST18
E260 3/12/2022 EG17 175 kg Job Ref: EST19
E261 3/15/2022 HP8 55 ltr Job Ref: EST20
E262 3/16/2022 EG01 15 kg Job Ref: EST21
E263 3/18/2022 HP8 20 ltr Job Ref: EST22
E264 3/21/2022 EG01 70 kg Job Ref: EST23
E265 3/22/2022 EG22 90 kg Job Ref: EST24
E266 3/24/2022 EG01 200 kg Job Ref: EST25
E267 3/26/2022 EG17 105 kg Job Ref: EST26
, Task 1:
Using the information given above, you should update the inventory ledger cards
to reflect the transactions that have taken place during the month, using the relevant
inventory valuation methods noted on each card.
Additional information:
On 31st March, 20 kgs of product EG17 were returned to the supplier as it arrived damaged.
This material was from the delivery received on 11th March.
During a routine check of the warehouse on 31st March, it was noticed that the lid on the
container holding orange cream filling HP10 had not been replaced securely. Unfortunately,
the filling has solidified and is beyond salvagable, so this needs to be written off.
Task 2:
Update the inventory ledger cards to reflect the two additional transactions given above
Task 3:
Complete the inventory count summary with the totals from your inventory ledger cards.
Task 4:
(a) In task 1 you were asked to write off inventory because the product had spoiled.
Explain why it is important that these entries are made in the inventory control
documentation
(b) Explain what effect poor inventory control as well as the possibility of having to write-off
products has on the profitability of the business and suggest at least two ways this could be
avoided
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