O Level Accounting (7707)•7707/12/M/J/23
Explanation
Inventory Valuation at Cost Steps:
- Calculate value of Product P: 300 units × 750.
- Calculate value of Product J: 200 units × 700.
- Add the values: 700 = $1,450.
- Inventory is valued at cost price, not selling price.
Why B is correct:
- Total cost value matches the formula: sum of (units × cost price per unit) for all items.
Why the others are wrong:
- A: Equals only Product P's value, ignoring J.
- C: Matches total selling price value (1,000), not cost.
- D: Overstates by using mixed cost and selling prices.
Final answer: B
Topic: Valuation of inventory
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