Accounting and Budgeting: FIFO and Average Method, Flexible Budget, Cost of Finance, NPV

Running head: ACCOUNTING AND BUDGETING
Accounting and budgeting
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1ACCOUNTING AND BUDGETING
Table of Contents
Question 1..................................................................................................................................2
a) FIFO method...................................................................................................................2
b) Average method..............................................................................................................2
Question 3..................................................................................................................................4
Question 4..................................................................................................................................5
a) Cost of each source of finnace........................................................................................5
b) Capital structure weights.................................................................................................6
Question 5..................................................................................................................................7
1. Net cash flow...................................................................................................................7
2. Net present value.............................................................................................................7
Question 6..................................................................................................................................8
a) Production budget...........................................................................................................8
b) Material budget...............................................................................................................8
Reference..................................................................................................................................10

2ACCOUNTING AND BUDGETING
Question 1
a) FIFO method
Date Particulars Units Cost P.U Total cost
1st April 2016 Opening inventory 180 $ 22.00
$
3,960.00
30th May 2016 Purchase 550 $ 23.00
$
12,650.00
31st August 2016 Purchase 450 $ 21.00
$
9,450.00
30th November
2016 Purchase 1050 $ 24.00
$
25,200.00
28th February
2017 Purchase 1050 $ 23.00
$
24,150.00
$75,410.0
0
Net purchase 3100
$
71,450.00
31st March 2017 Inventory on hand 465
Sales revenue for
October 2815
$
105,070.00
Cost of ending inventory
180 units @ 22 $ 3,960.00
285 units @ 23 $ 6,555.00
Cost of 465 units $ 10,515.00
Cost of goods sold
Cost of units available for sale $ 75,410.00
Less: cost of ending inventory $ 10,515.00
COGS for (3280-465) = 2815 units $ 64,895.00
b) Average method
Cost of ending inventory
Total cost of units available for sale $ 75,410.00
Total units available for sale 3280
Average cost per unit $ 22.99
Cost of ending inventory $ 10,690.75

3ACCOUNTING AND BUDGETING
Cost of goods sold
Cost of units available for sale $ 75,410.00
Less: cost of ending inventory $ 10,690.75
COGS for (3280-465) = 2815 units $ 64,719.25
Reports
FIFO $ Average cost
Beginning inventory $ 3,960.00 $ 3,960.00
Net purchase $ 71,450.00 $ 71,450.00
Cost of goods available $ 75,410.00 $ 75,410.00
Ending inventory $ 10,515.00 $ 10,690.75
Cost of goods sold $ 64,895.00 $ 64,719.25
Gross profit computation
Particulars FIFO Average method
Sales revenue $105,070.00 $ 105,070.00
Less: COGS $ 64,895.00 $ 64,719.25
Gross profit $ 40,175.00 $ 40,350.75
Question 2
a) Statement of compliance
Financial statements of ABC Company Ltd shall be prepared in compliance with the
NZ GAAP. Further, it must be complied with the NZ equivalent to the International Financial
Reporting Standards that is NZ IFRS as applicable for the for-profit companies and other
financial reporting standards applicable to it. Moreover, the accounting policies shall be
selected and applied in a way which assures that resulting financial information satisfies
concepts of reliability and relevance which in turn assure that substance of underlying
transactions or the other events have been reported (Bradbury & Mear, 2017).
b) Basis of presenting the financial statement