Intermediate Accounting 14th Edition

Published by Wiley
ISBN 10: 0470587237
ISBN 13: 978-0-47058-723-2

Chapter 8 - Valuation of Inventories: A Cost-Basis Approach - Concepts for Analysis - Page 486: CA8-7b

Answer

While the weighted average cost approach combines the cost of all purchases in the period with the cost of beginning inventory and divides the total costs by the total number of units to determine the average cost per unit, the moving average cost method calculates a new average unit cost when a purchase is made.

Work Step by Step

The moving average cost approach is therefore most suitable where there are perpetual inventory records.
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