CA Intermediate · Cost and Management Accounting · Material Cost
Which of the following is a feature of the Weighted Average method of pricing material issues?
Under the weighted average method, material is issued at the average price obtained by dividing total value of stock by total quantity in stock, and this price is recalculated whenever a new purchase is received.
- AIssues are priced at the latest purchase price
- BIssues are priced at the total cost of materials in stock divided by total quantity in stock, recalculated after each receiptCorrect
- CIssues are priced at the standard price fixed in advance
- DIssues are priced at the price of the oldest lot in stock
Explanation
In the weighted average method, the issue price is the total value of stock divided by the total quantity, and it is recalculated after every purchase. Latest price describes LIFO, oldest lot describes FIFO, and a predetermined price describes standard price.
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