COST ACCOUNTING
METHODS OF COSTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Computes a new weighted-average cost per unit after each purchase.
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Determined by dividing the cost of goods available for sale by the number of units available.
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Ending Inventory and Cost of Goods Sold are based on the same unit cost.
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WA will be the same for both perpetual and periodic
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Detailed explanation-1: -The Weighted Average Cost (WAC) is the cost flow assumption businesses use to value their inventory. WAC is the average cost of goods sold for all the inventory. Also called the moving average cost method, accountants perform this differently in a perpetual system as compared to a periodic system.
Detailed explanation-2: -Periodic weighted average cost method Under a periodic inventory system, the average cost method calculations are carried out at the end of the accounting period, with the weighted average cost based on the cost of the beginning inventory plus all purchases made during that period.
Detailed explanation-3: -When a perpetual inventory system is used, the weighted average is calculated each time a purchase is made. For example, after the June 7 purchase, the balance in inventory is 2 units with a total cost of $5.00 (1 unit at $2.00 + 1 unit at $3.00) resulting in an average cost per unit of $2.50 ($5.00 รท 2 units = $2.50).
Detailed explanation-4: -The periodic inventory system uses an occasional physical count to measure the level of inventory and the cost of goods sold. The perpetual system keeps track of inventory balances continuously, with updates made automatically whenever a product is received or sold.