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

Question

Quizplus · Accepted Answer

A new average cost is calculated after each purchase, not after each sale. The moving average cost method recalculates the average cost of inventory after each purchase or purchase return, not after sales.

Which Statement Relating to the Moving Average Method of Costing