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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