CFA Practice Question

There are 520 practice questions for this study session.

CFA Practice Question

Date Quantity Per Unit Total Cost
Jan 1: Beginning Inventory 100 $18.00 $1,800.00
Mar 4: Purchase 400 $19.00 $7,600.00
Apr 1: Sold 50 units
May 2: Purchase 100 $20.00 $2,000.00

In a perpetual system, what is the average cost per unit after the May 2 purchase?
A. $19.02
B. $18.80
C. $18.20
Explanation: The cost of the 450 units on hand before the May 2 purchase is $18.80 per unit. 450 units x $18.80 = $8,460 + $2,000 = $10,460. This total divided by the 550 unit total equals a $19.02 moving average cost per unit.

User Contributed Comments 8

User Comment
Jmiller74 Is the answer 19.02 or 18.8 I do not understand.
shasha it's 19.02, using updated cost divided by units left.
achu Remember, Perpetual system uses average cost of units- neither lifo nor fifo method.
ManuB How did they get "The cost of the 450 units on hand before the May 2 purchase is $18.80 per unit"?

1800 + 7600 = 9400. Now what do we subtract from 9400? How do we know the selling cost for the 50 units sold?
novica GOGS for 50 units is 18.80. Stick with the units not $$$
taysys1 We make a first calculation of average cost before the sale of 50 units:
Average cost before= (1800+7600)/500=18.80 per unit
Average cost after the May, 2 purchase= (450x18.8+100x20)=19.02
morek I just used the weighted average and got $19. Is that incorrect?
smarkheim how is this question medium difficulty?
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