(a) Identify the circumstances in which a cost formula may be used to establish the cost of inventories.
(b) A company’s inventories at 30 April 2018 include 11,000kg of a chemical which is used in the company’s manufacturing processes. Purchases and issues of this chemical during the year to 30 April 2018 were as follows:
Calculate the cost of the company’s inventory of the chemical at 30 April 2018 using each of the following cost formulas:
(i) First-in, first-out (FIFO).
(ii) Weighted average cost (AVCO).
