ACCA Applied Knowledge · Financial Accounting · Inventories
Dunmore Co values inventory using the periodic weighted average cost method. During the month it bought 400 units at $5 and 600 units at $8, with no opening inventory. It sold 700 units. What is the cost of sales for the month?
The cost of sales is $4,760, found by dividing total purchase cost of $6,800 by 1,000 units to get an average of $6.80 per unit and multiplying by the 700 units sold.
- A$4,480Correct
- B$5,600
- C$4,200
- D$6,800
Explanation
Total cost is 400x5 + 600x8 = $2,000+$4,800 = $6,800 for 1,000 units, so the average is $6.80. Cost of sales is 700 x $6.80 = $4,760. Check: closing 300 x 6.80 = $2,040; 6,800-2,040=$4,760.
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