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Bharat Indian Oil is a bulk distributor of petrol. A periodic inventory of petrol on hand is taken when the books are closed at the end of each month. The following summary of information is available for the month :
Sales                                   Rs.9,45,000
General administration cost Rs.25,000
Opening Stock: 1,00,000 litres @ Rs.3 per litre Rs.3,00,000
Purchases (including freight inward):
June 1 2,00,000 litres @ Rs.2.85 per litre
June 30 1,00,000 litres @ Rs.3.03 per litre
June 30 Closing stock 1,30,000 litres
 
Q.Compute the value of inventory on June 30 using weighted average method of inventory costing. 
  • a)
    Rs 3,75,000
  • b)
    Rs 3,90,000
  • c)
    Rs 2,80,000
  • d)
    Rs 4,10,000
Correct answer is option 'B'. Can you explain this answer?
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Bharat Indian Oil is a bulk distributor of petrol. A periodic inventor...
Calculation of Weighted Average Cost
To calculate the value of inventory on June 30 using the weighted average method, we need to determine the weighted average cost per litre. This is done by taking into account the opening stock, purchases, and closing stock quantities and their respective costs.

Step 1: Calculate the total cost of opening stock
Opening stock quantity: 1,00,000 litres
Cost per litre: Rs.3
Total cost of opening stock = Opening stock quantity * Cost per litre
Total cost of opening stock = 1,00,000 litres * Rs.3 = Rs.3,00,000

Step 2: Calculate the total cost of purchases
June 1 purchase quantity: 2,00,000 litres
June 1 purchase cost per litre: Rs.2.85
June 30 purchase quantity: 1,00,000 litres
June 30 purchase cost per litre: Rs.3.03

Total cost of purchases = (June 1 purchase quantity * June 1 purchase cost per litre) + (June 30 purchase quantity * June 30 purchase cost per litre)
Total cost of purchases = (2,00,000 litres * Rs.2.85) + (1,00,000 litres * Rs.3.03)
Total cost of purchases = Rs.5,70,000 + Rs.3,03,000 = Rs.8,73,000

Step 3: Calculate the weighted average cost per litre
Weighted average cost per litre = (Total cost of opening stock + Total cost of purchases) / (Opening stock quantity + Purchases quantity)
Weighted average cost per litre = (Rs.3,00,000 + Rs.8,73,000) / (1,00,000 litres + 3,00,000 litres + 1,00,000 litres)
Weighted average cost per litre = Rs.11,73,000 / 5,00,000 litres
Weighted average cost per litre = Rs.2.35 per litre

Step 4: Calculate the value of closing stock
Closing stock quantity: 1,30,000 litres
Value of closing stock = Closing stock quantity * Weighted average cost per litre
Value of closing stock = 1,30,000 litres * Rs.2.35 per litre
Value of closing stock = Rs.3,05,500

Therefore, the value of inventory on June 30 using the weighted average method of inventory costing is Rs.3,05,500.
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Bharat Indian Oil is a bulk distributor of petrol. A periodic inventory of petrol on hand is taken when the books are closed at the end of each month. The following summary of information is available for the month :Sales Rs.9,45,000General administration cost Rs.25,000Opening Stock: 1,00,000 litres @ Rs.3 per litre Rs.3,00,000Purchases (including freight inward):June 1 2,00,000 litres @ Rs.2.85 per litreJune 30 1,00,000 litres @ Rs.3.03 per litreJune 30 Closing stock 1,30,000 litresQ.Compute the value of inventory on June 30 using weighted average method of inventory costing.a)Rs 3,75,000b)Rs 3,90,000c)Rs 2,80,000d)Rs 4,10,000Correct answer is option 'B'. Can you explain this answer?
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Bharat Indian Oil is a bulk distributor of petrol. A periodic inventory of petrol on hand is taken when the books are closed at the end of each month. The following summary of information is available for the month :Sales Rs.9,45,000General administration cost Rs.25,000Opening Stock: 1,00,000 litres @ Rs.3 per litre Rs.3,00,000Purchases (including freight inward):June 1 2,00,000 litres @ Rs.2.85 per litreJune 30 1,00,000 litres @ Rs.3.03 per litreJune 30 Closing stock 1,30,000 litresQ.Compute the value of inventory on June 30 using weighted average method of inventory costing.a)Rs 3,75,000b)Rs 3,90,000c)Rs 2,80,000d)Rs 4,10,000Correct answer is option 'B'. Can you explain this answer? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about Bharat Indian Oil is a bulk distributor of petrol. A periodic inventory of petrol on hand is taken when the books are closed at the end of each month. The following summary of information is available for the month :Sales Rs.9,45,000General administration cost Rs.25,000Opening Stock: 1,00,000 litres @ Rs.3 per litre Rs.3,00,000Purchases (including freight inward):June 1 2,00,000 litres @ Rs.2.85 per litreJune 30 1,00,000 litres @ Rs.3.03 per litreJune 30 Closing stock 1,30,000 litresQ.Compute the value of inventory on June 30 using weighted average method of inventory costing.a)Rs 3,75,000b)Rs 3,90,000c)Rs 2,80,000d)Rs 4,10,000Correct answer is option 'B'. Can you explain this answer? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Bharat Indian Oil is a bulk distributor of petrol. A periodic inventory of petrol on hand is taken when the books are closed at the end of each month. The following summary of information is available for the month :Sales Rs.9,45,000General administration cost Rs.25,000Opening Stock: 1,00,000 litres @ Rs.3 per litre Rs.3,00,000Purchases (including freight inward):June 1 2,00,000 litres @ Rs.2.85 per litreJune 30 1,00,000 litres @ Rs.3.03 per litreJune 30 Closing stock 1,30,000 litresQ.Compute the value of inventory on June 30 using weighted average method of inventory costing.a)Rs 3,75,000b)Rs 3,90,000c)Rs 2,80,000d)Rs 4,10,000Correct answer is option 'B'. Can you explain this answer?.
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