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Basic Question 18 of 26
Diane Corporation had 400 units of inventory on hand on July 1, costing $20 each. Purchases and sales of goods during the month of July were as follows:
July 15 Purchases 100 units @ $26
July 25 Purchases 300 units @ $28
July 30 Sales 200 units @ $40
B. $8,000
C. $9,500
July 12 Sales 200 units @ $40
July 15 Purchases 100 units @ $26
July 25 Purchases 300 units @ $28
July 30 Sales 200 units @ $40
Assume Diane Corporation does not maintain perpetual inventory records. According to a physical count, 400 units were on hand on July 31.
The cost of inventory on July 31, using the weighted average cost method, is ______.
A. $11,000
B. $8,000
C. $9,500
User Contributed Comments 10
| User | Comment |
|---|---|
| rainatt | NOTHING ABOUT SALES. |
| kodali | I think it should be (200@$20)+(100@26)/300 = $22 (300 @22) + (300 @28)/600 = $25 $400 * 25 = $10,000 |
| gord | Answer is $9,500. Note that they do not maintain perpetual inventory records so the timing of the purchases is irrelevant and must be looked at in aggregate. |
| guna | Sales is ignored. Only pluses to inventories are used. |
| potocah | I think it should be 400@40 intead of 400@20!! |
| Vikku | No potocah. $20 is the purchase cost whereas $40 is the selling price which we don't consider in calculation. |
| fmhp | Cost of inventory=cost of goods for sale=BI+P |
| johntan1979 | Thanks gord. This is a good question. |
| isalya | got the same answer as Kodali. Should remember that it was not perpetual. |
| kingirm | With perpetual recording probably a moving average wouLD reflect a better estimate |
I am happy to say that I passed! Your study notes certainly helped prepare me for what was the most difficult exam I had ever taken.
Andrea Schildbach
Learning Outcome Statements
describe the measurement of inventory at the lower of cost and net realisable value and its implications for financial statements and ratios
CFA® 2024 Level I Curriculum, Volume 2, Module 6.