(a)[6]
State two benefits to a business of using each of the following inventory valuation methods: (i) First in first out (FIFO) (ii) Last in first out (LIFO) (iii) Average cost (AVCO).
(b)[3]
Explain why Kevin should not record his inventory at this price.
(c)[5]
Prepare the income statement for January and February using marginal costing.
(d)[6]
Prepare the income statement for January and February using absorption costing.
(e)[3]
Prepare a reconciliation statement showing the difference between the marginal cost profit and the absorption cost profit for January.
(f)[7]
Advise Kevin whether he ought to move from marginal costing to absorption costing. Justify your answer.