Solved problems No.5 related to cost accounting
The records of
Rajshahi Manufacturing Co. Ltd. show the following data relative to Material
No: R-172:
Balance: April 1, 1967 …2,700 units at Rs. 41
Received: April 4, 1967 ….2, 800 units at Rs. 42
13, 1967….2, 400 units
at Rs. 44
25, 1967….2, 200 units
at Rs. 43
Issued: April 3, 1967 ……2, 500 units
19, 1967….2, 600 units
30, 1967….2, 200 units
Instruction:
Find out the inventory balance and the cost of issue of the material on the
basis of weighted average.
Solution:
Cost of the
material purchased and on hand
However, the
weighted average works out Rs. 42,4257 or Rs. 42.43 because the different
values have to be multiplied by different frequency weights i.e. different
quantities have been purchased at different prices. If purchase is always done
in an uniform quantity, the prices need not be multiplied by the quantities
purchased because simply average of unit prices paid for in different purchase
transactions would yield the same result.
In weighted
average basis, the costs are taken into account at the end of the month.
Moving Average
Cost
The moving
average cost is the weighted average cost calculated at the time of each
issuance of materials. This is known as moving average because the cost moves
upwards or backwards according to each purchase and / or issue of materials.
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