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Appleby buys and sells inventory during the month of August as follows:
Opening inventory 100 units $2.52/unit
4 August Sales 20 units
8 August Purchases 140 units $2.56/unit
10 August Sales 90 units
18 August Purchases 200 units $2.78/unit
20 August Sales 180 units
The periodic weighted average for the month is calculated as follows:
Total value of inventory (opening inventory plus purchase costs during the month) divided
by total units (opening inventory plus purchase costs during the month).Which of the following statements is true?
A Closing inventory is $19.50 higher when using the FIFO method instead of the periodic
weighted average.
B Closing inventory is $19.50 lower when using the FIFO method instead of the periodic
weighted average.
C Closing inventory is $17.50 higher when using the FIFO method instead of the periodic
weighted average.
D Closing inventory is $17.50 lower when using the FIFO method instead of the periodic
weighted average.Answer is A)
> Please help me find closing inventory valuation. According to FIFO method, I’m getting correct valuation of $417 but I have tried several times according to WAC method, I am not getting any answer similar to the options. Using WAC, my C.I value is 402.3 and 417- 402.3 = 14.7 difference which has no options.
It is because they are using the periodic weighted average, which is not very common but is defined in the question.
To get the unit cost you add up the cost of the opening inventory and all of the purchases and then divide by the total units.
So it is ((100 x $2.52) + (140 x $2.56) + (200 x $2.78)) / 440 = $2.65 per unit.
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