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A company values stocks using the weighted average value after each purchase. The following receipts and issues have been made with regards to materials for the last month:
Brought forward – Receipts 100 units x $5 = $500
4th – Receipts 150 units x $5.50 = $825
16th – issues 100 units
20th – receipts 100 units x $6 = $600
21st – issues 75 unitswhat is the value of the closing inventory using this weighted average method ?
A.$1012.50 B.$976.50 C.$962.50 D.$925 ( correct is B)my working:
opening value $500 + total receipt in value $1425 = $1925 / opening units 100 + total receipt in units 250 = 350 unitstherefore $1925 / 350 units = $5.50 x closing bal.units 175 = $962.50
why the answer is B.$976.50 not C.$962.50 ? please help. Thank youYou cannot simply do it in total as you have done, the first line of the question specifically says to use the weighted average method after each purchase, and you have not done that.
To see how to do the weighted average method, you should watch the free lecture:
“Inventory and IAS2 Valuation of Inventory – Example 5” which works through and explains example 5 in the free Lecture Notes.hi sir, I cannot find a free lecture “Inventory and IAS2 Valuation of Inventory – Example 5
can you please inform in which chapter? thank youHi sir , please correct the following :
b/f units – 100 x $5 = $500
4th receipt – 150 x $5.50 = $825
total : 250 units & $13251325/250 = $5.30
16th – issue – 100 units x $5.30 = $530
inventory bal. 150 units x $5.30 = $795
20th – receipt – 100 units x $6 = $600
total : 250 units & $13951395/250=$5.58
21th – issue 75 units x $5.58=$418.50
inventory bal . 175units x $5.58 = $976.50
now I can get the answer is B.$976.50 ?
thank you
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