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A firm has the following transactions with its product R
1 jan – opening inventory: nil
1 feb – Buys 10 units at $300/unit
11 feb- Buys 12 units at $250/unit
1 Apr – sells 8 units at $400/unit
1 Aug – Buys 6 units at $200/unit
1 Dec – sells 12 units at $400/unit
The firm uses periodic weighted average cost (AVCO) to value its inventory. What is the value of the inventory at the end of the year?
A. $nil
B. $2057.12
C. $2400.00
D. $2007.20
Sir, I got the answer as option D but the answer given is B
can you explain why and how?Because it is periodic weighted average, they take the average cost of all the purchases.
So the total cost of the 28 units purchased is (10 x 300) + (12 x 250) + (6 x 200) = 7,200.
So the average cost per unit is $7,200/28 and the 8 units in inventory are valued at this average cost.However for the exam it is the cumulative weighted average that is most important.
@rameeza said:
A firm has the following transactions with its product R
1 jan – opening inventory: nil
1 feb – Buys 10 units at $300/unit
11 feb- Buys 12 units at $250/unit
1 Apr – sells 8 units at $400/unit
1 Aug – Buys 6 units at $200/unit
1 Dec – sells 12 units at $400/unit
The firm uses periodic weighted average cost (AVCO) to value its inventory. What is the value of the inventory at the end of the year?
A. $nil
B. $2057.12
C. $2400.00
D. $2007.20
Sir, I got the answer as option D but the answer given is B
can you explain why and how?
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