Which statement relating to the moving average method of costing inventories, used with the perpetual inventory system, is true?
A) A new average cost is calculated after each sale and each purchase.
B) A new average cost is calculated after each sale.
C) A new average cost is calculated after each purchase.
D) A new average cost is calculated at the end of each month.

Question

Quizplus · Accepted Answer

In the moving average method of costing inventories used with the perpetual inventory system, a new average cost is calculated after each purchase. This is because the average cost is based on the total cost of goods available for sale divided by the total units available for sale, and this changes each time there is a new purchase. The cost of goods sold is then calculated using the most recent average cost, which reflects the cost of the most recent purchases.

Which Statement Relating to the Moving Average Method of Costing