CA Intermediate · Cost and Management Accounting · Material Cost
Under the Weighted Average method of pricing material issues, when is the issue rate recalculated in a perpetual system?
In the perpetual weighted average method the issue rate is recomputed after every purchase receipt, by dividing the total value of stock by the total quantity on hand. Issues are priced at the current average and do not change it.
- AAfter every purchase receiptCorrect
- BOnly at the end of the month
- CAfter every issue
- DOnly when prices rise
Explanation
In the perpetual weighted average method, a new rate is computed each time a purchase is received, by dividing total value of stock by total quantity on hand. Issues themselves are made at the existing rate and do not change it. Hence recalculation follows each receipt.
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