On July 1, Maxwell Company had 40 units of inventory at a cost of $6 per unit. July purchases and sales were as follows:
The cost of goods sold during July was $272. Maxwell must use:
A) FIFO
B) LIFO perpetual
C) weighted average
D) LIFO periodic

Question

On July 1, Maxwell Company had 40 units of inventory at a cost of $6 per unit. July purchases and sales were as follows:  
The cost of goods sold during July was $272. Maxwell must use:
A) FIFO 
B) LIFO perpetual 
C) weighted average 
D) LIFO periodic

Quizplus · Accepted Answer

Weighted average is the best choice for Maxwell Company because it takes into account all units and their corresponding costs. The cost per unit can be calculated by dividing the total cost of inventory (beginning inventory + purchases) by the total number of units (beginning inventory + purchases) to get the weighted average cost per unit. This method smooths out any fluctuations in costs and provides a more accurate reflection of the actual cost of goods sold.

On July 1, Maxwell Company Had 40 Units of Inventory