ICAEW AF · Chapter 9 · Question 5 of 9
A business had opening inventory of 200 units at £5 each. During the period it bought 300 units at £6 each and then 400 units at £6.50 each. It sold 650 units. What is the value of closing inventory using the first-in, first-out (FIFO) method?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) £1,625
Explanation
Units in closing inventory = 200 + 300 + 400 - 650 = 250. Under FIFO, the earliest units are assumed to be sold first, so the 250 units remaining come from the most recent purchase at £6.50. Closing inventory = 250 x £6.50 = £1,625.
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