CIMA BA3 · Chapter 9 · Question 6 of 10
A business had opening inventory of 100 units at $5 each. It bought 300 units at $6 and then 200 units at $7. It sold 450 units in the period. What is the value of closing inventory using FIFO?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) $1,050
Explanation
Closing inventory = 100 + 300 + 200 - 450 = 150 units. Under FIFO the oldest units are sold first, so the 150 units remaining come from the latest purchase: 150 x $7 = $1,050. Distractors: weighted average would give ($500 + $1,800 + $1,400) / 600 = $6.1667 x 150 = $925 (exact, no rounding needed); valuing the closing units at $6 gives $900 and at $5 gives $750.
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