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Weighted Average Price Method

The weighted average method is based on the assumption that each issue of goods consists of due proportion of earlier lots. Weighted average cost is calculated by dividing the total cost of goods in stock by the total quantity of goods in stock.

 

 


Illustration 4

A Ltd. provides you with the following information:

  • 1-1-2012 Opening Stock 200 units at ₹ 2.00 p. u
  • 5-2-2012 Purchased 300 units at ₹ 1.50 p. u
  • 6-3-2012 Issued 400 units
  • 7-4-2012 Purchased 300 units at ₹ 3.06 p. u
  • 9-5-2012 Issued 350 units

Compute the value of inventory and cost of goods sold as on 9-5-2012 assuming

  1. Perpetual system
  2. Periodic system under weighted average price method.

Solution: (a)

Stock ledger under Weighted Average Method (Using Perpetual system)


 

 

Particulars

A. Opening inventory

400

B. Add: Purchases (₹ 450 + ₹ 918)

1,368

C. Less: Cost of goods sold (₹ 680+ ₹ 952)

(1,632)

D. Closing Inventory (A +B - C)

136


Statement showing the weighted average cost per unit under weighted average method (Using Periodic system)

 

Date

Quantity

Rate (₹)

Total Cost (₹)

01-01-2012

200

2.00

400

02-01-2012

300

1.50

450

04-01-2012

300

3.06

918

 

800

 

1,768


Weighted Average Cost per unit = ₹ 1,768/800 = ₹ 2.21


Statement showing the value of inventory and cost of goods sold under weighted average method (Using Periodic system)

 

Particulars

A. Opening inventory

400

B. Add: Purchases (₹ 450 + ₹ 918)

1,368

C. Less: Ending inventory (50 x ₹ 2.21)

(110.5)

D. Cost of goods sold (A + B - C)

1,657.5





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