Which statement relating to the moving average method of costing inventories, used with the perpetual inventory system, is incorrect?
A) A new average cost is calculated after each sale.
B) A new average cost is calculated after each purchase return.
C) In periods of rising prices the profit result is between that of the FIFO and LIFO methods.
D) The formula for average cost is cost of goods available for sale divided by units for sale.

Question

Quizplus · Accepted Answer

The moving average cost method recalculates the average cost after each purchase, not after each sale. The new average cost is determined after each purchase or purchase return, affecting the cost of the remaining inventory.

Which Statement Relating to the Moving Average Method of Costing