Question

A company reports the following beginning inventory and two purchases for the month of January. On January 26, the company sells 280 units. Ending inventory at January 31 totals 130 units. UnitsUnit Cost Beginning inventory on January 1250$2.30 Purchase on January 960 2.50 Purchase on January 25100 2.64 Required: Assume the perpetual inventory system is used. Determine the costs assigned to ending inventory when costs are assigned based on the weighted average method. (Round your per unit costs to 2 decimal places.)

Answer 1

Answer:

Weighted average cost of ending inventory as at Jan 31 = 130 units x $2.41 = $313.3

Explanation:

The weighted average cost method is a way of inventory valuation which determines the average cost of the total inventory items based on the individual costs and the quantity of each item that is held in stock.

It is calculated by dividing the total cost of all units available for sale (1) by the number of units available for sale (2), which helps derive the weighted average cost per unit. This multiplied by the units in ending inventory will provide the cost of ending inventory.

Cost of units available for sale:

Beginning inventory on Jan 1st = 250 units x $2.30 = $575

Purchases on Jan 9th = 60 units x $2.50 = $150

Purchases on Jan 25th = 100 units x $2.64 = $264

1. Total cost of units available for sale = $575 + $150 + $264 = $989

2. Number of units available for sale = 250 + 60 + 100 = 410 units

Weighted average cost per unit = $989 / 410 = $2.41

Weighted average cost of goods sold = 280 units x $2.41 = $674.8

Weighted average cost of ending inventory as at Jan 31 = 130 units x $2.41 = $313.3