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From the following data, find out the gross profit on the inventory sold under weighted average price method
1st Jan – opening inventory – 1000 units @ Rs. 4 per unit
15th Jan – Purchases – 1100 units @ Rs. 5 per unit
30th Jan – Purchases – 1300 units @ Rs. 6 per unit
Sales during the month – 3000 units @ Rs. 10 per unit
  • a)
    Rs. 14,735
  • b)
    Rs. 15,000
  • c)
    Rs. 14,300
  • d)
    Rs. 15,100
Correct answer is option 'A'. Can you explain this answer?
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Given Data:
- Opening inventory on 1st Jan: 1000 units @ Rs. 4 per unit
- Purchases on 15th Jan: 1100 units @ Rs. 5 per unit
- Purchases on 30th Jan: 1300 units @ Rs. 6 per unit
- Sales during the month: 3000 units @ Rs. 10 per unit

Step 1: Calculate Weighted Average Cost (WAC):
To calculate the weighted average cost, we need to find the total cost and total units of inventory.

Opening inventory cost = 1000 units * Rs. 4 per unit = Rs. 4000
Purchases on 15th Jan cost = 1100 units * Rs. 5 per unit = Rs. 5500
Purchases on 30th Jan cost = 1300 units * Rs. 6 per unit = Rs. 7800

Total cost = Opening inventory cost + Purchases on 15th Jan cost + Purchases on 30th Jan cost
= Rs. 4000 + Rs. 5500 + Rs. 7800
= Rs. 17300

Total units = Opening inventory units + Purchases on 15th Jan units + Purchases on 30th Jan units
= 1000 units + 1100 units + 1300 units
= 3400 units

Weighted average cost (WAC) = Total cost / Total units
= Rs. 17300 / 3400 units
= Rs. 5.0882 per unit (approx.)

Step 2: Calculate Cost of Goods Sold (COGS):
COGS = Units sold * WAC
= 3000 units * Rs. 5.0882 per unit
= Rs. 15264.60 (approx.)

Step 3: Calculate Gross Profit:
Gross Profit = Sales Revenue - COGS
= Units sold * Sales price - COGS
= 3000 units * Rs. 10 per unit - Rs. 15264.60
= Rs. 30,000 - Rs. 15264.60
= Rs. 14735.40 (approx.)

Therefore, the gross profit on the inventory sold under the weighted average price method is approximately Rs. 14735. Hence, option A is the correct answer.
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From the following data, find out the gross profit on the inventory sold under weighted average price method1st Jan – opening inventory – 1000 units @ Rs. 4 per unit15th Jan – Purchases – 1100 units @ Rs. 5 per unit30th Jan – Purchases – 1300 units @ Rs. 6 per unitSales during the month – 3000 units @ Rs. 10 per unita)Rs. 14,735b)Rs. 15,000c)Rs. 14,300d)Rs. 15,100Correct answer is option 'A'. Can you explain this answer?
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