ACCA Management Accounting F2 Practice Exam 2025 – Complete Study Guide

To determine the physical inventory, we need to understand the relationship between units on order, outstanding units, and free inventory.

Physical inventory can be calculated using this relationship:

**Physical Inventory = Free Inventory + (Units on Order - Outstanding Units)**

Given the values from the question:

- Units on order: 27,500

- Outstanding units: 16,250

- Free inventory: 13,000

First, we calculate the units that are effectively available for use:

- Effective Units on Order = Units on Order - Outstanding Units

- Effective Units on Order = 27,500 - 16,250 = 11,250

Now, we can calculate the physical inventory:

- Physical Inventory = Free Inventory + Effective Units on Order

- Physical Inventory = 13,000 + 11,250 = 24,250

The answer in the question does not align because it suggests that the correct answer is 1,750. However, according to the calculations provided, the physical inventory would indeed be 24,250.