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Chapter 6: 16RQ (page 357)

When using the periodic inventory system and weighted-average inventory costing method, when is the weighted-average cost per unit computed?

Short Answer

Expert verified

Answer

The periodic inventory system computes the weighted average cost only once at the end of the period.

Step by step solution

01

Weighted average cost method

The weighted average cost is the average value of all the costs incurred in purchasing the inventories for a particular period.

02

Weighted average cost under the periodic system

Under the periodic system, the weighted average cost is computed only once at the end of the period. At the end of the period, all the inventory purchased is summed up at their respective cost and the average value is computed by dividing the sum by the total inventories at the end of the period.

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Most popular questions from this chapter

What does the lower-of-cost-or-market (LCM) rule require?

Assume that AB Tire Store completed the following perpetual inventory transactions for a line of tires:

May 1 Beginning merchandise inventory 16 tires @ \( 65 each

11 Purchase 10 tires @ \) 78 each

23 Sale 12 tires @ \( 88 each

26 Purchase 14 tires @ \) 80 each

29 Sale 18 tires @ $ 88 each

Requirements

3. Compute cost of goods sold and gross profit using the weighted-average inventory costing method. (Round weighted-average cost per unit to the nearest cent and all other amounts to the nearest dollar.)

When using the periodic inventory system, which inventory costing method(s) always produces the same result as when using the perpetual inventory system?

Question:Boston Cycles started October with 12 bicycles that cost \(42 each. On October 16, Boston bought 40 bicycles at \)68 each. On October 31, Boston sold 34 bicycles for\(100 each.

Requirements

1. Prepare Boston Cycle鈥檚 perpetual inventory record assuming the company usesthe specific identification inventory costing method. Assume that Boston sold 10bicycles that cost \)42 each and 24 bicycles that cost $68 each.

Right Now Electronic Center began October with 100 units of merchandise inventory that cost \(70 each. During October, the store made the following purchases:

Oct. 3 35 units @ \) 82 each

12 45 units @ \( 84 each

18 75 units @ \) 90 each

Right Now uses the periodic inventory system, and the physical count at October 31indicates that 130 units of merchandise inventory are on hand.

Requirements

3. Which method will result in the lowest income taxes for Right Now? Why? Whichmethod will result in the highest net income for Right Now? Why?
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