Question

A company values its inventory by dividing the total cost of goods available for sale by the sum of the beginning inventory balance and the total amount of purchase made during the period. This method is known as

a. LIFO

b. Moving-Average Cost

c. Specific Identification

d. Weighted Average Cost

Answer 1

A company values its inventory by dividing the total cost of goods available for sale by the sum of the beginning inventory balance and the total amount of purchase made during the period. This method is known as

Ans : d. Weighted Average Cost

**Under the weighted average method, we divide the cost of goods available for sale by the number of units available for sale, which yields the weighted-average cost per unit. In the calculation, the cost of goods available for sale is the sum of beginning inventory and the total amount of purchase made during the period.

>>Under LIFO (Last in First out), Assign the cost of the newest goods to cost of goods sold and cost of oldest goods to ending inventory. In other word under LIFO, method used to account for inventory that records the most recently produced items as sold first.

>>under Moving average method of cost flow assumption wherein after each goods purchased, the average unit cost of the item is recomputed. This is done by adding the cost of the newly-acquired goods or units to the cost of the units already in the inventory. And this cost is used to calculate the cost of goods sold.

>>Under Specific Identification method, it trace the cost of individual items and records the items in the cost of goods sold. It requires a detailed physical count, to knows exactly how many of each goods brought on specific dates remained at year end inventory for valuing ending inventory also.