To compare the different inventory valuation methods, consider the following fictional company preparing a semi-annual balance sheet. Each month 100 units of a raw material is purchased, but the price goes up each period. At the end of six months, the company takes a physical count and sees that 300 units are left and 300 units have been consumed. Units Cost per Unit Cost
January 100 $10 $1,000
February 100 $11 $1,100
March 100 $12 $1,200
April 100 $13 $1,300
May 100 $14 $1,400
June 100 $15 $1,500
In total, 600 units have been purchased at an average price of for a total cost of.

In total, 600 units have been purchased at an average price of $12.50 for a total cost of $7,500.

Explanation:

total cost of the 600 units = $1,000 + $1,100 + $1,200 + $1,300 + $1,400 + $1,500 = $7,500

average price per chair = $7,500 / 600 = $12.50

this inventory valuation method is called the weighted average method, and it assigns the same cost regardless of when the units were purchased.

i'ts proportional. if the inflation rate is 12% for example, the cpi will be 12% less.

hope it ,

bioteacher101

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