Download WEIGHTED AVERAGE METHOD – PERIODIC INVENTORY

WEIGHTED AVERAGE METHOD – PERIODIC INVENTORY SYSTEM
The following information was obtained from the financial records of Quintus Stores
that uses the periodic inventory system and weighted average method of cost
determination. The purchase prices of inventories are as follows:
Number of units
200 000
500 000
600 000
1 300 000
Weighted average price
Cost per unit
R5
R6
R8
Total cost
R1 000 000
R3 000 000
R4 800 000
R8 800 000
8 800 000/1 300 000
R6,77 per unit
During the year 1 240 000 units were sold.
Number of units available at the end of the year: 1 300 000 – 1 240 000 = 60 000
Value of closing inventory: 60 000 x R6,77 = R406 200
The current cost to replace inventories sold is R8 per unit. Because the weighted
average method is used the closing inventories is valued at R6,77 per unit. The
closing inventory is shown at a lower price as the replacement value.