CFA Level I · CFA Level I Exam · Analysis of Inventories
A company buys 100 units at 10 each, then 100 units at 12 each, and sells 120 units in the period. Under the periodic weighted average cost method, cost of goods sold is closest to:
Cost of goods sold is about 1,320. Total cost available is 2,200 for 200 units, giving an average cost of 11 per unit, and 120 units sold at 11 each produces 1,320. This differs from FIFO, which would report a lower figure when prices are rising.
- A1,200
- B1,320Correct
- C1,360
Explanation
Total cost = 1,000 + 1,200 = 2,200 for 200 units, so the average is 11. COGS = 120 x 11 = 1,320. FIFO would give 100x10 + 20x12 = 1,240, and 1,200 results from pricing all units at 10.
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