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The following information relates to the inventory of Scarf Ltd during the month of October...

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Question

Accounting

The following information relates to the inventory of Scarf Ltd during the month of October 2019. Ignore GST.

Units

Units cost ($)

Total cost ($)

1 Oct

Beginning inventory

2,100

11

23,100

10 Oct

Purchase

1,500

11.6

17,400

15 Oct

Purchase

900

12.2

10,980

23 Oct

Purchase

1,500

13

19,500

Totals

6,000

$70,980

Scarf Ltd uses the Periodic Inventory System. A physical count on 31 October verified that 1900 units were on hand.

Required:

  1. Determine the Ending inventory and Cost of Sales for the month of October, using the FIFO costing method. (3 marks)
  2. Discuss the differences between Perpetual and Periodic Inventory systems. (3 marks)
  3. Would you recommend the Perpetual Inventory System to the management of Scarf Ltd? Explain. (2 marks)

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