The weighted average method is based on the assumption that the cost of merchandise sold should be calculated using the:
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A. B. C. D.A
Under the weighted average method, inventory is priced at the average cost of the goods available for sale (Beginning inventory plus purchases during the period).
The weighted average method is a technique used to calculate the cost of merchandise sold and determine the value of ending inventory. This method assumes that the cost of merchandise sold should be calculated using the average price per unit of inventory.
To understand the weighted average method, let's break down the options provided:
A. Average price of beginning inventory plus purchases during the period: This option suggests that the cost of merchandise sold is calculated by adding the average price of the beginning inventory to the purchases made during the period. However, this approach does not consider the actual units sold during the period and may not accurately reflect the cost of merchandise sold.
B. Average price per unit of ending inventory: This option implies that the cost of merchandise sold is based on the average price per unit of the ending inventory. However, the ending inventory includes units that were not sold during the period, so using this average price alone would not provide an accurate calculation of the cost of merchandise sold.
C. Average price per unit of beginning inventory: This option suggests that the cost of merchandise sold is determined by using the average price per unit of the beginning inventory. While this approach may capture the cost of the units sold from the beginning inventory accurately, it fails to consider the purchases made during the period.
D. Average price of ending inventory plus purchases during the period: This option correctly states that the cost of merchandise sold should be calculated using the average price. It considers both the ending inventory and the purchases made during the period. By averaging the cost of the ending inventory with the purchases made, this method provides a more accurate estimation of the cost of merchandise sold.
In conclusion, the correct answer is D. The weighted average method calculates the cost of merchandise sold using the average price of the ending inventory plus the purchases made during the period.