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9609 · 10.1.3

Inventory valuation — practice questions

Practice and worked examples for 9609 Inventory valuation. Short previews only — attempt the full question in MarkScheme against the official scheme.

Worked example 1

Opening inventory: 100 units @ $4. Purchases: 200 units @ $5, then 100 units @ $6. Sales: 250 units.

Calculate closing inventory (units and value) and cost of sales using FIFO.

Show solution outline

Units remaining: 100 + 200 + 100 − 250 = 150 units

Cost of sales (FIFO — oldest sold first): 100 units @ $4 = $400 150 units @ $5 = $750 Cost of sales = $1,150

Closing inventory (newest layers left): 50 units @ $5 = $250 100 units @ $6 = $600 Closing inventory = $850

Check: Opening $400 + Purchases $1,600 − Closing $850 = $1,150 ✓

Worked example 2

TechGadgets Ltd had the following inventory transactions for its 'ProSound' headphones in April:

  • Apr 1: Opening inventory of 50 units at a cost of $80 each.
  • Apr 8: Purchased 100 units at $85 each.
  • Apr 15: Sold 120 units.
  • Apr 22: Purchased 80 units at $90 each.
  • Apr 28: Sold 70 units.

Calculate the value of closing inventory and the cost of goods sold for April using the FIFO method.

Show solution outline

1. Calculate Cost of Goods Sold (COGS)

First Sale (120 units on Apr 15):

  • The first 50 units sold are from opening inventory: 50 units × $80 = $4,000
  • The next 70 units are from the Apr 8 purchase: 70 units × $85 = $5,950
  • COGS for first sale = $4,000 + $5,950 = $9,950

Second Sale (70 units on Apr 28):

  • After the first sale, 30 units remain from the Apr 8 purchase (100 - 70).
  • The first 30 units sold are these remaining units: 30 units × $85 = $2,550
  • The next 40 units are from the Apr 22 purchase: 40 units × $90 = $3,600
  • COGS for second sale = $2,550 + $3,600 = $6,150

Total COGS for April:

  • Total COGS = $9,950 + $6,150 = $16,100

2. Calculate Closing Inventory

Units available: 50 (opening) + 100 (Apr 8) + 80 (Apr 22) = 230 units Units sold: 120 + 70 = 190 units Closing units: 230 - 190 = 40 units

Value of Closing Inventory (FIFO - newest stock remains):

  • The remaining 40 units are from the latest purchase (Apr 22).
  • Value = 40 units × $90 = $3,600

Check: Opening Inventory ($4,000) + Purchases (($8,500)+($7,200)) - Closing Inventory ($3,600) = COGS $4,000 + $15,700 - $3,600 = $16,100 ✓

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