Answer:
The average cost of ending inventory is $37,259 and cost of goods sold for october is 24,166
Explanation:
In order to calculate the average cost of ending inventory, we would have to calculate first the cost to retail ratio with the following formula:
cost to retail ratio=Total cost/Total retail
According to the given data, the total cost=$61,425, and the total retail= $87,100, Hence:
cost to retail ratio=$61,425/$87,100= 70.5%
Also, we have to calculate the ending inventory at retail=$87,100+$1,700-$1,050-$37,00=$52,850
Therefore, the average cost of ending inventory= $52,850×70.5%
=$37,259
To calculate the cost of goods sold for october we would have to use the following formula:
cost of goods sold=Beginning inventory+purchases-ending inventory
=$40,000+$21,425-$37,259
=$24,166
