Advanced AccountingQuestion 5325 of 305
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1. What would be the value of closing stock of Raw Material X and Finished Goods as on 31st March 2024?

Options

AClosing Stock of Raw Material X ` 50,000 and closing stock of Finished Goods ` 3,50,000
BClosing Stock of Raw Material X ` 50,000 and closing stock of Finished Goods` 3,00,000
CClosing Stock of Raw Material X ` 62,500 and closing stock of Finished Goods ` 3,50,000
DClosing Stock of Raw Material X ` 62,500 and closing stock of Finished Goods ` 3,00,000
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Correct Answer

✅ Option B — Closing Stock of Raw Material X ` 50,000 and closing stock of Finished Goods` 3,00,000

All Options:

  • AClosing Stock of Raw Material X ` 50,000 and closing stock of Finished Goods ` 3,50,000
  • BClosing Stock of Raw Material X ` 50,000 and closing stock of Finished Goods` 3,00,000 ✓
  • CClosing Stock of Raw Material X ` 62,500 and closing stock of Finished Goods ` 3,50,000
  • DClosing Stock of Raw Material X ` 62,500 and closing stock of Finished Goods ` 3,00,000

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Detailed Solution & Explanation

To calculate the value of closing stock of Raw Material X and Finished Goods under AS 2:
1. Finished Goods cost per unit:
- Raw material cost = 2 unitsב 125=‘ 250\displaystyle 2 \text{ units} \times `\,125 = `\,250
- Conversion cost (labour & variable overhead) = ‘ 1,00,000/1000=‘ 100\displaystyle `\,1,00,000 / 1000 = `\,100
- Total Cost = 250+100=‘ 350\displaystyle 250 + 100 = `\,350 per unit.
- Net Realizable Value (NRV) = ‘ 300\displaystyle `\,300 per unit.
- Valued at lower of cost and NRV = ‘ 300\displaystyle `\,300 per unit.
- Closing stock of finished goods = 1000 unitsב 300=‘ 3,00,000\displaystyle 1000 \text{ units} \times `\,300 = `\,3,00,000.
2. Raw Material X cost per unit:
- Remaining raw material = 4000−(1000×2)−1500=500\displaystyle 4000 - (1000 \times 2) - 1500 = 500 units.
- Under AS 2, since the finished goods are expected to be sold at a loss (cost 350, NRV 300), raw material is written down to its replacement cost.
- Replacement cost of raw material = ‘ 100\displaystyle `\,100 per unit.
- Value of closing stock of raw material = 500ב 100=‘ 50,000\displaystyle 500 \times `\,100 = `\,50,000.
Hence, **Option B** is the correct answer.

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