Which inventory valuation method uses the average price paid for products over time?

The weighted average purchase price method is the correct choice because it calculates the average cost of all inventory items over a specific time period. This approach takes into account all purchases made and divides the total cost by the number of units available for sale, resulting in an average cost per unit. This method smooths out price fluctuations over time, providing a more stable valuation during periods of varying costs.

In contrast, the actual purchase price method records the cost at which each item was purchased, reflecting the specific price paid rather than an average. FIFO (First-In, First-Out) assumes that the oldest inventory items are sold first, which can lead to higher profit margins during inflationary periods as older, cheaper inventory is accounted for first. LIFO (Last-In, First-Out) operates on the opposite principle, assuming that the most recently acquired inventory items are sold first, which can lead to lower profits and tax liabilities during times of rising prices. Each of these methods serves different accounting strategies and financial reporting needs but does not calculate an average price like the weighted average purchase price does.