Companies that sell a large number of inexpensive items generally do not track the specific cost of

Companies that sell a large number of inexpensive items generally do not track the specific cost of

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Companies that sell a large number of inexpensive items generally do not track the specific cost of  each unit in inventory. Instead, they use one of the other three methods to allocate inventoriable  costs. These other methods (average cost, FIFO, and LIFO) are built upon certain assumptions  about how merchandise flows through the company, so they are often referred to as  assumed cost  flow methods  or  cost flow assumptions . Accounting principles do not require companies to  choose a cost flow method that approximates the actual movement of inventory items. 
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Unformatted text preview: Average cost . Companies that use the periodic system and want to apply the same cost to all units in an inventory account use the weighted average cost method. The weighted average cost per unit equals the cost of goods available for sale divided by the number of units available for sale. For Zapp Electronics, the cost of goods available for sale is $ 7,200 and the number of units available for sale is 450, so the weighted average cost per unit is $ 16....
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