ITPEC FE Morning October 2019 Question 79
ITPEC FE Morning October 2019 — Question 79 of 80
Inventory Valuation Methods — identify the method that averages cost over an entire accounting period.
The question describes calculating unit price by dividing total purchase amount by total quantity at the end of the accounting period — this is the periodic average method.
- •Moving average recalculates after each new purchase.
- •Periodic average calculates once at the end of the period using all purchases.
Why not others:
- (a) FIFO (First-In, First-Out) — costs items at the price of the earliest purchases; no averaging involved.
- (b) LIFO (Last-In, First-Out) — costs items at the price of the latest purchases; no averaging involved.
- (c) Moving average — recalculates the average unit cost after every new purchase, not just at period end.
Key rule: "Total ÷ total at period end" = periodic average; "recalculate after each purchase" = moving average.
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