Palgrave Macmillan: Companion website for Collis - Business Accounting: Chapter 13

The FIFO method is based on:
1. the assumption that it is only used for management accounting purposes
2. the order in which direct materials are purchased
3. the order in which stocks of direct materials are issued from store
4. the order in which prices of direct materials in stock are used
If the price of direct materials is rising, using FIFO means the cost of direct materials used is:
1. close to the most recent price
2. higher than the most recent price
3. lower than the most recent price
4. the average of all prices
If the price of direct materials is rising, using CWA means the cost of direct materials used is:
1. close to the most recent price
2. higher than the most recent price
3. lower than the most recent price
4. the average of all prices
The prime cost is:
1. total direct costs
2. total cost less all indirect costs
3. production cost plus production overheads
4. all of these
On 1 June Tito bought 100 shirts at £5 each to sell in his Saturday market stall. On 6 June he bought another 50 shirts at £6 each. On 7 June he sold 50 shirts at £10 each. If Tito uses the FIFO method, the value of stock at the close of business on 7 June is:
1. £800
2. £550
3. £525
4. £500
Using the same data, if Tito uses the CWA method, the value of stock at the close of business on 7 June is:
1. £800
2. £550
3. £533
4. £500

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