CFA Practice Question

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CFA Practice Question

Consider the following activity schedule:

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)

In a perpetual inventory system, what is the average cost per unit after the March 4 purchase?
A. $18.00
B. $18.80
C. $18.20
Explanation: The average cost per unit is determined by dividing the total cost of $9,400 by the 500 units purchased ($9,400 / 500 units = $18.80, the average cost per unit).

User Contributed Comments 6

User Comment
murli Any purchase, the average cost is the same! Don't get confused about the date.
Joel1980 Perpetual Inventory must equal Weighted Average Cost.
azramirza From where does 9400 come? Oh, it's (BI) 1800 + (Purchase) 7600
prtwf wow... where does the LOS or question mention WAC = Perp Inventory method... this material needs some work...
CJPerugini @Joel1980 that is not true. A perpetual system means that inventory and COGS are being updated at every transaction instead of once a period. Perpetual systems can follow LIFO, FIFO, or Weighted Avg Cost.
Inaganti6 Thanks CJPerugini. I don't know how some people pontificate their opinions like they're facts. Ridiculous.
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