CMA Intermediate · Cost Accounting · Material Costs
Sharma Components Ltd. purchased 400 units at Rs 50 per unit on 1 March and 600 units at Rs 60 per unit on 10 March. On 15 March it issued 500 units. Using the weighted average method (average computed after the second purchase, with no opening stock), what is the value of closing stock after the issue?
The weighted average price is Rs 56,000 divided by 1,000 units, which is Rs 56 per unit. After issuing 500 units, 500 units remain, so closing stock is 500 times Rs 56, giving Rs 28,000. Rs 30,000 would arise only under FIFO.
- ARs 28,000Correct
- BRs 30,000
- CRs 27,500
- DRs 30,500
Explanation
Total cost = 400x50 + 600x60 = 20,000 + 36,000 = 56,000 for 1,000 units, so the average is Rs 56 per unit. Issue of 500 units = Rs 28,000. Closing stock = 500 units x 56 = Rs 28,000. FIFO would give 500 units issued as 400x50 + 100x60 = 26,000, leaving Rs 30,000, which is the wrong method here.
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