Which statement best describes the weighted average cost method when identical inventory units are purchased at different prices?
Correct answer: D. All units are valued at an average unit cost
- A. Each unit keeps its original purchase price
- B. The earliest purchase price applies to every unit
- C. The latest purchase price applies to every unit
- D. All units are valued at an average unit cost
Explanation
The weighted average method combines the cost of available units and divides it by the number of available units. It therefore assigns an average cost to units issued and units remaining.
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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.
Practise Inventory Valuation
34 free Inventory Valuation MCQs from Accounting, each with the correct answer and an explanation. Unlimited attempts, no account needed.
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More Inventory Valuation questions
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:
A loss caused by abnormal wastage of materials during production is generally treated as:
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:
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: