CMA Intermediate · Financial Management and Business Data Analytics · Inventory Management
Ganga Appliances buys 100 units at Rs 50 in January, then 100 units at Rs 60 in February, then 100 units at Rs 70 in March. It sells 150 units during the period. Under the weighted average method (periodic, all purchases pooled), what is the cost of closing inventory of 150 units?
Closing inventory is Rs 9,000. Total purchases cost Rs 18,000 for 300 units, giving a weighted average cost of Rs 60 per unit, and 150 unsold units at Rs 60 equal Rs 9,000.
- ARs 9,000Correct
- BRs 9,500
- CRs 8,500
- DRs 10,500
Explanation
Total cost = 5,000 + 6,000 + 7,000 = Rs 18,000 for 300 units, so average cost is Rs 60. Closing 150 units = 150 x 60 = Rs 9,000. FIFO would give 100x70 + 50x60 = Rs 10,000, and LIFO would give Rs 8,000, so those methods differ.
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