A business values inventory using AVCO. The following data is available: Date Details Units Unit cost $ 1 Apr Opening balance 400 6.00 10 Apr Purchase 600 7...

Assessment: Accounting 0452 | Paper 1 Mock 01 | Multiple Choice Subject: Accounting - 0452

Question 1 Report

A business values inventory using AVCO. The following data is available:

Date	Details	Units	Unit cost $
1 Apr	Opening balance	400	6.00
10 Apr	Purchase	600	7.00
20 Apr	Sale	500	-

What is the value of closing inventory?

$3 300

$3 500

$3 250

$3 000

Answer Details

The correct answer is $3 250.

Under AVCO, the weighted average cost is calculated after each purchase.

Opening balance: 400 units x $6.00 = $2 400.

Purchase: 600 units x $7.00 = $4 200.

Total: 1 000 units costing $6 600.

Weighted average cost: $6 600 / 1 000 = $6.50 per unit.

After selling 500 units, remaining inventory: 1 000 - 500 = 500 units.

Closing inventory value: 500 x $6.50 = $3 250.

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