HP is a leading distributor of petrol. A detail inventory of petrol in hand is taken
when the books are closed at the end of each month. At the end of June the
following information is available
47.25.000
General overhead cost
1.25.000
Inventory at beginning
1 lakh litres 15 per litre
Purchase
June
2 lakh litres 14.25
June 30
1 lakh litres 15-15
Closing inventory 130 lakh litres
Compute the following by the FIFO as per AS-2:00 value of inventory on June 30
« amount of cost of goods sold for June; (b) profit/loss for the month of June
Answers
Answer:
Monika G answered on September 02, 2016
5 Ratings, (9 Votes)
Hi
Answer:
The (COGS) for June must be established before the FIFO technique can be used to compute the inventory value on June 30. First-in, first-out, or FIFO, is a stock rotation method in which products with the longest shelf lives are cleared out first.
Explanation:
June 30 litre According to the data, the inventory at the beginning of June amounted to 1 lakh litre, and the price per litre was Rs.15, for a grand total of Rs.15 lakh. HP acquired two million litres on June June 30for $14.25 per litre, for a total expenditure of $28.50 million. One million plus two million equals three million litres of stock in June.
If HP sold 2.70 million litres in June, the remaining 30,000 litres would be added to the 1.30 million litres in stock at the end of the month. Hence, we would use the formula below to get the Cost of Goods Sold for June.
Sales Revenue = ($1,000,000) * ($2,000,000) * ($2.7,000,000) = ($84,000,000)
We need to know how much everything in stock originally cost to apply the FIFO approach to our inventory. As of June June, 30we made a profit of 2.70 Lakh L June, and we had to replenish our stock by purchasing 1.30 Lakh L. The most recent purchases were made onHP acquired two million litres0 at 15-15 per litre. Thus, that will be used to determine the cost of the closing inventory using the FIFO technique. On JuJune 30the value of the stock will be calculated as follows:
1.30 million litres x (15-15) per litre = 19.50 million rupees; this is the stock value as of June 30.
Revenue from the sale of gas in June is subtracted from COGS to arrive at a net profit or loss for the month. If HP were able to sell 2.70 million litres at $18 per litre, the company's June earnings would be:
Earnings = 2,710,000 x 18 = $48,000,000
Thus, June's gain/loss would be:
Profit/Loss = Revenue - COGS - General overhead cost = 48.60 lakh - 84 lakh - 1.25 lakh = -36.65 lakh (Loss)
In summary, using the FIFO method, we can calculate the inventory value on June 30 by considering the most recent purchases. We can also calculate June's COGS and profit/loss by considering the oldest inventory items sold first.
To learn more about COGS, click on the link below.
https://brainly.in/question/15402456
To learn more about stock rotation, click on the link below.
https://brainly.in/question/5345898
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