A retailer has 80 units costing Rs. 15 each and buys 120 more units at Rs. 20 each. Under a periodic weighted average method, the cost per unit is:
Correct answer: B. Rs. 18.00
- A. Rs. 17.00
- B. Rs. 18.00
- C. Rs. 18.50
- D. Rs. 19.00
Explanation
The total cost is Rs. 1,200 plus Rs. 2,400, or Rs. 3,600, for 200 units. The weighted average cost is therefore Rs. 18 per unit, not the simple average of the two prices.
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About Inventory Valuation
Inventory valuation determines the cost of unsold goods and its effect on cost of sales and profit. The work covers inventory counts, included costs, FIFO and weighted-average costing, and the rule that inventory is reported at the lower of cost and net realisable value, not simply at its expected selling price.
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More Inventory Valuation questions
Which statement best describes the weighted average cost method when identical inventory units are purchased at different prices?
If the net realisable value of inventory later increases, an earlier write-down under IAS 2 may be:
When inventory is written down to net realisable value, the resulting loss is generally recognized as:
Which cost is included in inventory when it is directly attributable to bringing the goods to their present condition?
When production is abnormally low because of an unexpected factory shutdown, the unallocated fixed overhead is generally:
Raw materials may remain measured at cost rather than being written down when: