Section D imp topics

[Nancy]

Section D is the most examined and the most important section of the syllabus.

Study guide D1 - You need to know the formula for Economic order quantity thoroughly to solve the questions from this SG. The other formulae that you need to know are for the various inventory levels. Amongst this the formula for re-order level calculation is most important.

I will now give important topics for each SG separately since this is an important section to study.

[Geetanjali]

How does one valuate inventory under the FIFO and the weighted average (WA) method?

FIFO method:

• Unit prices of materials issued are recorded at the unit price of the batch that is purchased first
• Further issues are recorded at the price of the batch purchased next
• Value of closing stock is equal to cost of batch of materials purchased last

WA method:

• Closing stock valued at weighted average price

WA Formula:




Regards
Geetanjali