Accounting (AS)·Cost structures · NSSCAS 5.1.1
FIFO & AVCO inventory valuation
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Two shops can buy and sell exactly the same bags of maize meal and still report different profits - it all depends on how they value the inventory left on the shelf. In this lesson you build a stock card and value closing inventory using FIFO and AVCO, then trace exactly how each answer changes cost of sales and gross profit. This is a favourite Paper 2 calculation in the cost and management accounting section, so every step is written out line by line.
What you'll learn in this lesson
By the end you should be able to (NSSCAS Accounting (AS) 5.1.1):
- calculate closing inventory using FIFO and AVCO
- calculate the effect on gross profit of FIFO and AVCO methods of inventory valuation
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Miss Olivia and Mike talk through the whole topic — with the figure and working drawn live.