(a) Identify the circumstances in which a cost formula may be used to establish the cost of inventories.

(b) A company's inventories at 30 April 2020 include 11,000kg of a chemical which is used in the company's manufacturing processes. Purchases and issues of this chemical during the year to 30 April 2020 were as follows:

Calculate the cost of the company's inventory of the chemical at 30 April 2020 using each of the following cost formulas:

(i) First-in, first-out (FIFO)

(ii) Weighted average cost (AVCO).

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May 2019 June 2019 August 2019 September 2019 October 2019 January 2020 February 2020 Opening inventory Issued to production Purchased Issued to production Issued to production Purchased Issued to production Number of kg 32,000| 25,000 15,000 12,000 5,000 10,000 4,000 Cost per kg £7.50 £8.75 £9.50