Month: February 2022

Inventory cost prices are rising for a business. The company uses AVCO rather than FIFO to value its inventory.

What is the effect on inventory valuation and profit of using AVCO rather than FIFO?

Select ONE answer:

1. inventory valuation – higher / profit – higher
2. inventory valuation – higher / profit – lower
3. inventory valuation – lower / profit – higher
4. inventory valuation – lower / profit – lower

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 4

1. Not correct
2. Not correct
3. Not correct
4. Correct

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The following information relates to the inventory of a business.

Estimated unit selling price at 30 June is £20.

There was no opening inventory.

What was the value of closing inventory at 31 January using FIFO?

Select ONE answer:

1. £24 600
2. £28 600
3. £29 400
4. £44 000

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 3

1. Not correct
2. Not correct
3. Correct ==> (1,000 * £12) + (1,000 * £13) + (1,000 * £14) – (800 * £12)
4. Not correct

This work is licensed under a Creative Commons Attribution 4.0 International License.

A manufacturing business has provided the following information about a product.

                                                        units produced              total cost £

                                                        8 000                                   37 000 
                                                        14 000                                 53 500 

What is the variable cost per unit?

Select ONE answer:

1. £2.75
2. £3.82
3. £4.11
4. £4.63

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 1

1. Correct – (£53,500 – £36,000) / (14,000 – 8,000) ==> £2.75
2. Not correct
3. Not correct
4. Not correct

This work is licensed under a Creative Commons Attribution 4.0 International License.