UW's forecast accounts for the year ending 30th April 2012:
Without changing stockholding policy or including May sales to China.
Apr-12
$000s
Turnover
13,200
Cost of Sales
6,150
Indirect Expenses
3,000
Net Profit
4,050
Changing stockholding policy but excluding sales to China.
Apr-12
$000s
Turnover
13,200
Cost of Sales
4,945
Indirect Expenses
3,000
Net Profit
5,255
Units (000s)
Value (£000s)
Per Unit Cost
AVCO
Opening stock
400
3000
7.5
Purchases:
May
200
2000
10
July
100
800
8
September
200
2000
10
December
100
900
9
March
300
2350
7.83
8.72
Closing stock
700
6105.56
8.72
Total
2000
4944.44
2.47
Without changing stockholding policy but including sales to China.
Apr-12
$000s
Turnover
15,840
Cost of Sales
7,000
Indirect Expenses
3,000
Net Profit
5,840
Units (000s)
Value (£000s)
Per Unit Cost
Opening stock
400
3000
Purchases:
May
200
2000
July
100
800
8
September
200
2000
10
December
100
900
March
300
2350
China May Sales
120
1000
Closing stock
580
5050
Total
2000
7000
Changing stockholding policy and including sales to China.
Apr-12
$000s
Turnover
15,840
Cost of Sales
6,302
Indirect Expenses
3,000
Net Profit
6,538
Units (000s)
Value (£000s)
Per Unit Cost
AVCO
Opening stock
400
3000
7.5
Purchases:
May
200
2000
10
8.75
8.75
July
100
800
8
16.75
8.375
September
200
2000
10
18.375
9.1875
December
100
900
9
18.1875
9.09375
March
300
2350
7.83
16.9271
8.46354
8.77396
China May Sales
120
1052.4
8.77
Closing stock
580
5800
10
Total
2000
6302.4
3.1512
Comment on the validity of the Financial Director's proposed treatment of stock valuation and revenue recognition, referring to relevant International Accounting Standards as appropriate.
Average Cost method
Average Cost method for inventory valuation is a method of valuation of their expenditures, consisting in its accounting using the weighted average price of purchase. This method can be used for disbursement of materials, goods and products. Inventory valuation methods are important due to the fact that the prices of purchased materials and overall production costs change over time. Often a situation where at the warehouse inventory units were taken at various prices. Issuing from the warehouse store, the company has to decide at what price to post its release. If the company does not use specific identification inventory method, it is not able to accurately identify which part of them was adopted after the price. He knows just how much inventory was taken at a given price (Sudan, 2009, p. 87). Enterprises adopt a particular pricing model so, for example, the weighted average method for cadastral. According to the weighted average method, at the time of inventory from the warehouse enterprise edition accounts for the value weighted average price of goods held in stock.
Average Cost method is quite popular and often used in accounting. Suffice it works well for stocks whose prices are not subject to trends but rather vary in certain price range. The method of weighted average smooths out these variations, thereby reducing the company's profit fluctuations. This is the plus of this method in comparison with the FIFO or LIFO. Weighted average method is permitted by the cadastral accounting and tax rules in most countries. The method of valuation of stocks using the stock value at the date of closure are the same as the value adopted in the cost of their own sales (Fedor, 2006, p. 47). This method does not reflect the actual cost method, because most companies usually sells old stocks first, stopping the latest. Weighted average cost of inventories is a compromise between competing methods FIFO and LIFO.
The weighted average method is to evaluate the outputs of stock by using ratio of acquisition costs with the quantity purchased without taking into account the entry and exit of the goods available in the inventory. Determining the cost of entry for stocks The notion of stocks in relation to international standards. IAS 02 indicates what is meant by the term stocks: