Question

Delta Diamonds had 5 diamonds available for sale this year: 1 purchased June 1 for $500, 2 purchased July 9 for $550 each, and 2 purchased September 23 for $600 each. On December 24, it sold 1 of the diamonds. Using periodic weighted average cost, its inventory after the December 24 sale is ______.

Answer 1

Answer: Inventory on after sale = 4 x $560 = $2240

Explanation:

Value of Inventory under Periodic weighted average costing method is calculated at the end of the period by adding all purchases costs and divide the total by number of units. the major draw back of this inventory costing system is that inventory books are only updated once a year.

first purchase: 1 diamond = $500

second purchase: 2 diamonds = $550 x 2 = $1100

third purchase : 2 diamonds =  $600 x 2 = $1200

total purchases = 500 + 1100 + 1200 = 2800

Total units = 5

Weighted average cost per unit = total cost/total units = 2800/5 = $560

1 diamond was sold, therefore the are 4 diamonds on hand

Inventory on hand after sale = 4 x $560 = $2240