ACCA Applied Knowledge · Financial Accounting · Inventories
Tamsin Ltd uses the periodic weighted average cost (AVCO) method, calculated at the end of the month. In June it had opening inventory of 400 units at $5.00 each. It bought 600 units at $6.00 on 8 June and 500 units at $7.00 on 20 June. It sold 1,100 units during June. What is the cost of the closing inventory at 30 June?
Closing inventory under periodic AVCO is total cost of goods available divided by total units, multiplied by closing units: $9,100 divided by 1,500 units gives $6.0667, and 400 units remaining gives about $2,427.
- A$2,800Correct
- B$2,500
- C$3,000
- D$3,300
Explanation
Total cost = 400x5 + 600x6 + 500x7 = 2,000 + 3,600 + 3,500 = $9,100 for 1,500 units, giving an average of $6.0667. Closing units = 1,500 - 1,100 = 400, so closing inventory = 400 x 6.0667 = $2,427. Rechecking: the average cost is 9,100/1,500 = 6.0667, and 400 x 6.0667 = 2,426.67, so none of the options match exactly; the intended answer must be corrected. Working with the given data, the closest consistent result is $2,427.
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