Question

ABC applies a periodic inventory system. The following information related to its merchandise inventory during the month of October 2019 is available:

Oct. 1	Inventory on hand	3,000 units; cost €6,10 each
9	Purchase	10,000 units; cost €5,5 each
15	Sale	9,000 units; for €13,0 each
17	Purchase	7,000 units; cost €5,0 each
23	Sale	8,000 units; for €11,0 each
31	Inventory on hand	3,000 units

The inventory balance reported in ABC’s October 2019 statement of financial position under the Weighted-average cost flow method, is:

Select one:

a. 16,245

b. 12,500

c. 18,300

d. 10,500

e. 17,500

Answer 1

The amount is computed as shown below:

Average cost per unit is computed as follows:

= Opening inventory x price per unit + Purchase on Oct 9 x price per unit + Purchase on Oct 17 x price per unit

= 3,000 units x 6.10 + 10,000 units x 5.5 + 7,000 units x 5

= 108,300 / 20,000 units

= 5.415

So, the amount will be as follows:

= Average cost per unit x Closing inventory

= 5.415 x 3,000 units

= 16,245

So, the correct answer is option a.

Feel free to ask in case of any query relating to this question