A firm has the following transactions with its product R.
| 1 January 20X3 | Opening inventory: nil |
| 10 February 20X3 | Buys 15 units at $145 per unit |
| 12 February 20X3 | Buys 17 units at $120 per unit |
| 9 April 20X3 | Sells 13 units at $195 per unit |
| 13 August 20X3 | Buys 11 units at $95 per unit |
| 15 December 20X3 | Sells 17 units at $195 per unit |
The firm uses periodic weighted average cost (AVCO) to value its inventory. What is the inventory value at the end of the year?
Answer
Price per unit under periodic weighted average cost
= Total cost /(opening quantity + total quantity received)
= ($0+$145 x 15 + $120 x 17 + $95 x 11)/(0+15+17+11)
= $122.33 per unit.
Valuation of closing inventory of 13 units
= (0+15+17+11–13–17) x $122.33 = 13 x $122.33
= $1,590.29