Explain the circumstances where a theoretical inventory valuation method may have to be used to value inventory.
A company in the building industry is about to value its inventory of steel bars. It has 5,000 steel bars in inventory on 30 September 2014, all of equal size and quality, which were delivered in lorry loads at 100 steel bars per lorry. During the financial year ended 30 September 2014, the price of steel bars fluctuated, as follows:
There was no opening inventory of steel bars. The company values its inventory on the ‘First In First Out’ basis. Calculate the value of its inventory of steel bars at 30 September 2014.