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The following transactions relate to a raw material for a period: Day 1 balance b/f $500 of 100 units,Day 2 issue 40 units,day 3 receipt $275 of 50 units,Day 6 receipt $300 of 50 units,Day 7 issue 70 units…….The periodic weighted average method is used to price material issues.What is the value of the issue on Day 7?….Answer:All receipts =(500+275+300)$=$1075.Units=(100+50+50)=200.Rate=$1075/200=5.375$. On Day 7 the value of the issue=70 x $5.375=$376.25…..Is this correct?
Yes, that’s correct for periodic moving averages.
If cumulative weighted average were used, the calculation would be:
Day 1: 100 units, $500: average cost = $5/unit
Day 2: Issue 40, so we are left with 60 @ $5 = $300
Day 3: Receive 40 costing $275. Totals = 100 and $575
Day 6: Receive 50 costing $300. Totals = 150 and $875Average cost at this point is 875/150 = 5.833
Value of day 7 issue = 5.833 x 70 = 408.33
Thanks a lot.Actually that was my answer.But exam kit answer was different.That’s why i had to be sure if i was wrong or right.
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