- CFA Exams
- CFA Level I Exam
- Topic 3. Financial Statement Analysis
- Learning Module 22. Inventories
- Subject 3. Periodic versus Perpetual Inventory System
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
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? |