Final answer:
Costing inventory using the weighted average calculates a single average cost by dividing the total cost of goods by the total number of units, applied to both COGS and ending inventory. The difference between periodic and perpetual systems is in the timing of the calculation; it's at the end of the period for periodic, and after each purchase for perpetual.
Step-by-step explanation:
Costing inventory using the weighted average method involves calculating a single average cost per unit that is applied to the units sold and the units remaining in inventory. The calculation entails summing the total cost of goods available for sale and dividing that sum by the total number of units available for sale. The resulting average cost per unit is then used to value both the cost of goods sold (COGS) and ending inventory.
In a periodic inventory system, the weighted average cost is calculated at the end of the period, taking into account all purchases made during the period. This average cost is then applied to the COGS and ending inventory. On the other hand, in a perpetual inventory system, the weighted average cost is recalculated after each purchase. Each time goods are sold, the COGS is based on the most recent weighted average cost.
For instance, if a company purchased 100 units at $10 each and later purchased another 100 units at $20 each, under the periodic system, the weighted average cost per unit after both purchases would be ($1,000 + $2,000) / 200 units = $15 per unit. In a perpetual system, the average cost would be updated after the second purchase to reflect the new average.