What are the definitions of cost, variable cost, prime cost, inventory control, and economic order quantity, and how are they applied in inventory management using the FIFO method?

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Asked on May 8, 2026Accounting

This accounting problem is solved step by step below, with detailed explanations to help you understand the method and arrive at the correct answer.

Accepted Answer · 2026-05-08T10:24:56.144Z

Right Mr, let's go. Question 6: The amount used up to provide a service is the cost incurred. A. cost Question 7: A variable cost is one that changes in direct proportion to the volume of production. C. variable cost Question 8: Direct wages are a component of prime cost, which includes direct materials and direct labor. B. prime cost Question 9: Inventory control is the process of managing stock levels to ensure they are optimal, balancing availability and cost. D. inventory control Question 10: A goods received note (GRN) is used to confirm the receipt of goods from a supplier and to check them against the purchase order. B. check the goods sent by the supplier. Question 11: The Economic Order Quantity (EOQ) is the order size that minimizes the total inventory costs, including ordering and holding costs. D. economic order quantity Question 12: A stock verification sheet is used to record the findings of physical stock counts, especially during continuous stocktaking. B. stock verification sheet For Questions 13 and 14, we use the FIFO (First-In, First-Out) method. Inventory Data: July 1: Stock balance = 200 units @ D 2.50 each July 5: Receipt = 400 units @ D 3.00 each July 10: Issues = 400 units Step 1: Determine the total available stock before issues. From July 1: 200 units × D 2.50 = D 500 From July 5: 400 units × D 3.00 = D 1,200 Total units available = 200 + 400 = 600 units Step 2: Calculate the cost of issues using FIFO. The FIFO method assumes the first units purchased are the first ones issued. Issue 400 units: First, take 200 units from July 1 stock: 200 units × D 2.50 = D 500 Remaining units to issue: 400 - 200 = 200 units Next, take 200 units from July 5 stock: 200 units × D 3.00 = D 600 Total cost of issues = D 500 + D 600 = D 1,100 Question 14: What is the cost of issues using FIFO method of pricing issues? C. D 1,100 Step 3: Calculate the closing stock using FIFO. Total units available = 600 units Units issued = 400 units Closing units = 600 - 400 = 200 units Since 200 units from July 1 and 200 units from July 5 were issued, the remaining 200 units in closing stock must be from the latest* receipt, which is the July 5 stock. Value of closing stock = 200 units × D 3.00 = D 600 Question 13: Calculate the closing stock using the FIFO method of pricing issues. B. D 600 Drop the next question 📸

Accepted Answer · 2026-05-08T10:24:56.144Z

Right Mr, let's go. Question 6: The amount used up to provide a service is the cost incurred. A. cost Question 7: A variable cost is one that changes in direct proportion to the volume of production. C. variable cost Question 8: Direct wages are a component of prime cost, which includes direct materials and direct labor. B. prime cost Question 9: Inventory control is the process of managing stock levels to ensure they are optimal, balancing availability and cost. D. inventory control Question 10: A goods received note (GRN) is used to confirm the receipt of goods from a supplier and to check them against the purchase order. B. check the goods sent by the supplier. Question 11: The Economic Order Quantity (EOQ) is the order size that minimizes the total inventory costs, including ordering and holding costs. D. economic order quantity Question 12: A stock verification sheet is used to record the findings of physical stock counts, especially during continuous stocktaking. B. stock verification sheet For Questions 13 and 14, we use the FIFO (First-In, First-Out) method. Inventory Data: July 1: Stock balance = 200 units @ D 2.50 each July 5: Receipt = 400 units @ D 3.00 each July 10: Issues = 400 units Step 1: Determine the total available stock before issues. From July 1: 200 units × D 2.50 = D 500 From July 5: 400 units × D 3.00 = D 1,200 Total units available = 200 + 400 = 600 units Step 2: Calculate the cost of issues using FIFO. The FIFO method assumes the first units purchased are the first ones issued. Issue 400 units: First, take 200 units from July 1 stock: 200 units × D 2.50 = D 500 Remaining units to issue: 400 - 200 = 200 units Next, take 200 units from July 5 stock: 200 units × D 3.00 = D 600 Total cost of issues = D 500 + D 600 = D 1,100 Question 14: What is the cost of issues using FIFO method of pricing issues? C. D 1,100 Step 3: Calculate the closing stock using FIFO. Total units available = 600 units Units issued = 400 units Closing units = 600 - 400 = 200 units Since 200 units from July 1 and 200 units from July 5 were issued, the remaining 200 units in closing stock must be from the latest* receipt, which is the July 5 stock. Value of closing stock = 200 units × D 3.00 = D 600 Question 13: Calculate the closing stock using the FIFO method of pricing issues. B. D 600 Drop the next question 📸

What are the definitions of cost, variable cost, prime cost, inventory control, and economic order quantity, and how are they applied in inventory management using the FIFO method?

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What are the definitions of cost, variable cost, prime cost, inventory control, and economic order quantity, and how are they applied in inventory management using the FIFO method?

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