ICAEW AF · Chapter 9 · Question 6 of 9
A business uses the weighted average cost method, recalculating the average after each purchase. Its inventory movements for the month were: Opening inventory: 100 units at £10.00 Purchase: 300 units at £12.00 Sale: 250 units Purchase: 250 units at £13.10 Sale: 220 units What is the value of closing inventory?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) £2,250
Explanation
After the first purchase: 400 units costing £1,000 + £3,600 = £4,600, average £11.50. After selling 250: 150 units at £11.50 = £1,725. After the second purchase: 400 units costing £1,725 + £3,275 = £5,000, average £12.50. Closing inventory = 180 units x £12.50 = £2,250.
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