SPU

Financial Accounting 2A / Accounting 2A – 2024

Class practice question 1 - Inventory

The following information has been extracted from the books of M Ltd, a manufacturer,
for the financial year ending 31/12/2020.
Sales amounted to R600 000 for the financial year ended 31/12/2020.
Inventory consists of the following opening balances:
Finished goods R94 000
Work in progress R30 000
Raw materials R60 000

Purchases of raw materials during the year amounted to R195 000

Variable production costs per unit R2
Fixed production costs R150 000

Additional Information:
1. Variable production costs are calculated based on actual production for the
year
2. Fixed production costs are allocated based on a normal capacity of 100 000
units. The actual production for the financial year was 65 000 units.
3. Closing inventory is as follows:
Cost Net Realisable Value
Raw materials R40 600 R40 600
Work in progress R94 500 R85 000
Finished goods R80 000 R75 000
M Ltd uses the FIFO method to value inventory.
Required:
Indicate how inventory will be disclosed in the financial statements of M Ltd for the
financial year ended 31/12/2020 in compliance with IAS 2.