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Management-Information-question-bank-2019_part1

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ngochuongotuon
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© © All Rights Reserved
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18 In a period of falling prices, four students have recorded the cost of sales of commodity X.

One student has used the FIFO method of inventory valuation and one has used the LIFO
method. The other two students have used an average cost method, using the periodic and
cumulative weighted average basis respectively.
The gross profits recorded by the students were as follows:
Student Recorded gross profit
£
A 12,600
B 13,400
C 14,500
D 15,230
Which student was using the LIFO method of inventory valuation?
A Student A
B Student B
C Student C
D Student D LO 1c

19 Which of the following are true?


(1) With FIFO, the inventory valuation will be close to replacement cost.
(2) With LIFO, inventories are issued at a price which is close to the current market value.
(3) Decision-making can be difficult with both FIFO and LIFO because of the variations in
prices.
(4) A disadvantage of the weighted average method of inventory valuation is that the
resulting issue price is rarely an actual price that has been paid and it may be
calculated to several decimal places.
A (1) and (2) only
B (1), (2) and (4) only
C (1) and (3) only
D (1), (2), (3) and (4) LO 1c

20 For many years Sunny has faced rising prices on his main raw material. He maintains
inventories of this material at a constant volume. He uses the FIFO method of inventory
valuation. If he had used the LIFO method this would have resulted in
A higher cost of sales and lower inventory value
B higher cost of sales and higher inventory value
C lower cost of sales and lower inventory value
D lower cost of sales and higher inventory value LO 1c

18 Management Information: Question Bank ICAEW 2019


The following information relates to questions 21 and 22.
G Ltd makes the following purchases and sales:
1 January Purchases 4,000 units for £10,000
31 January Purchases 1,000 units for £2,000
15 February Sales 3,000 units for £13,000
28 February Purchases 1,500 units for £3,750
14 March Sales 500 units for £1,200

21 At 31 March which of the following closing inventory valuations using FIFO is correct?
A £8,000
B £7,500
C £7,000
D £6,500 LO 1c

22 At 31 March which of the following closing inventory valuations using LIFO is correct?
A £6,500
B £7,000
C £7,500
D £8,000 LO 1c

23 With all average price systems where it is required to keep prices up to date, the average
price must be re-calculated
A each time an issue is made
B each accounting period
C each time a purchase is made
D each time an inventory count is carried out LO 1c

The following information relates to questions 24 and 25


Inventory Item 2362 X
Receipts Issues
Price per Price
Date Units unit Value Units per unit Value
£ £ £ £
1 June Opening inventory 100 5.00 500
3 June Receipts 300 4.80 1,440
5 June Issues 220
12 June Receipts 170 5.20 884
24 June Issues 300

ICAEW 2019 Chapter 2: Calculating unit costs (Part 1) 19


24 Using the cumulative weighted average price method of inventory valuation, the cost of the
materials issued on 5 June was
A £1,056
B £1,067
C £1,078
D £1,100 LO 1c

25 Using the cumulative weighted average price method of inventory valuation, the value of
closing inventory on 30 June was
A £248
B £250
C £251
D £260 LO 1c

26 A wholesaler buys and resells a range of items, one of which is the Kay. Each Kay is resold
for £3 per unit and opening inventory for June was 400 units valued at £1.80 per unit. The
wholesaler purchased a further 600 units on 10 June for £2.10 per unit, and sold 800 units
on 25 June.
What gross profit would be recorded for the sale of Kays during June, using the FIFO
method of inventory valuation?
FIFO gross profit
A £780
B £960
C £840
D £1,560 LO 1c

27 A wholesaler buys and resells a range of items, one of which is the Kay. Each Kay is resold
for £3 per unit and opening inventory for June was 400 units valued at £1.80 per unit. The
wholesaler purchased a further 600 units on 10 June for £2.10 per unit, and sold 800 units
on 25 June.
What gross profit would be recorded for the sale of Kays during June, using the LIFO
method of inventory valuation?
LIFO gross profit
A £840
B £720
C £780
D £1,620 LO 1c

20 Management Information: Question Bank ICAEW 2019


28 At the beginning of week 5 there were 600 units of material M held in inventory, valued at
£6 per unit.
The following purchases and issues occurred during the subsequent four week period.
Purchases Issues to production
Week Units Cost per unit Units
£
5 – 350
6 400 8 –
7 – – 300
8 100 9 –
Inventory is valued using a periodic weighted average price calculated at the end of each
four week period.

To the nearest £, the value of the inventory at the end of week 8 is


A £3,150
B £3,431
C £3,450
D £3,690 LO 1c

ICAEW 2019 Chapter 2: Calculating unit costs (Part 1) 21


22 Management Information: Question Bank ICAEW 2019

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