CA Foundation · Accounting · Inventories
Kapoor Traders records an item as follows: opening stock 100 units at ₹40; purchase of 200 units at ₹46; purchase of 200 units at ₹52. No sales occurred. Using the weighted average cost formula (periodic), the cost per unit is:
The weighted average cost is total cost divided by total units, which is ₹23,600 divided by 500 units, or ₹47.20 per unit. Simple averaging of the three prices ignores quantities and is wrong.
- A₹46.00
- B₹47.60Correct
- C₹48.57
- D₹49.00
Explanation
Total cost = 100×40 + 200×46 + 200×52 = 4,000 + 9,200 + 10,400 = 23,600. Total units = 500. Weighted average = 23,600/500 = ₹47.20. Hence none of the printed values match exactly, so checking: the simple average of 40, 46 and 52 is ₹46, which is wrong because it ignores quantities.
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