Stock Valuation

							Stock Valuation
Yak Ltd values closing stock on the FIFO basis, but the production
manager thinks the closing stock value is compromised by holding too
much of the most expensive stock. The top-of-the-range stock item is the
Imperial widget. The company has had supply difficulties and actually ran
out of this stock line at the end of April. The production manager provides
you with stock movements for the 'Imperial' in May and asks you to…

   ii)    …calculate the closing stock values using the FIFO method and
          the AVCO method, which he favours.

           Stock movement - MAY

                                          Unit Cost
              1/5    Balance         0
              2/5    Purchased     300          £80
              5/5    Purchased     500          £95
              7/5    Issued        600
             12/5    Purchased     700        £105
             20/5    Issued        500
             27/5    Purchased     800        £120
             28/5    Issued        900

   iii)   The Purchasing Department had hoped to have a contract
          finalised to purchase Uzbekistan-made Imperial widgets at £57
          each. The contact should have been signed on 25 May but was
          delayed. If the contract had been signed, then the order on 27
          May would have been at the new price. Out of curiosity the
          production manager asks what the closing stock values would
          have been using both FIFO and AVCO and, if there were any
          odd results, could you explain why?