Question

Where opening stock of 50 units of finished goods are valued at Rs. 10 each and the average unit cost of 500 units produced during the period is Rs. 8.90, which method of stock valuation gives a closing stock value of Rs. 9 per unit?

• A. FIFO (First-in-First out Method)
• B. Weighted average
• C. Absorption cost based on normal activity
• D. Marginal cost

Answer 1

The correct option is B Weighted average

There are various methods of calculating the cost of inventory i.e. FIFO, LIFO, Simple Average and weighted average method:

Weighted Average method of inventory valuation is done on the basis of taking the overall cost of inventory divided by the total number of units:

Solution is as Under:

Opening stock 50 10.00 500

Production 500 8.90 4450

Total 550 4950

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Weighted Average per units = 4950/550

Weighted Average cost per units=Rs.9.00