ACCA FA · Chapter 5 · Question 6 of 10
A business uses the continuous weighted average cost (AVCO) method. Its inventory movements in March were: 1 March: opening inventory 100 units at $5.00 4 March: purchased 200 units at $5.50 15 March: sold 180 units 20 March: purchased 150 units at $6.00 28 March: sold 170 units What is the value of closing inventory at 31 March, to the nearest $?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) $570
Explanation
After 4 March: 300 units costing $500 + $1,100 = $1,600, average $5.3333. 15 March sale removes 180 x $5.3333 = $960, leaving 120 units at $640. After 20 March: 270 units costing $640 + $900 = $1,540, average $5.7037. 28 March sale removes 170 x $5.7037 = $969.63, leaving 100 units at $570.37, which rounds to $570. A periodic average ($2,500 / 450 x 100 = $556) is not the continuous method.
More Inventory (IAS 2) MCQs
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- Q9What is the double entry to record closing inventory at the end of an accounting period?
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- Q1According to IAS 2 Inventories, how should inventories be measured?
- Q2Which of the following costs should NOT be included in the cost of inventory under IAS 2?