Question

Hardware Inc. has a periodic inventory system and uses the weighted-average method. The company began the year with 150 large brass switch plates on hand at a cost of $4.00 each. Purchases of switch plates during the year were as follows:
Date of Transaction Quantity Received Unit Cost
May 7 200 $ 4.20
June 11 200 $ 4.40
November 22 250 $ 4.80

The switch plates sell for $7.00 each.
Required:
If Hardware sells 570 switch plates during the year, what is the company's cost of goods sold?

Answer 1

Answer:

the company's cost of goods sold is $ 2,337

Explanation:

With Weighted Average Cost, a new cost of Inventory is calculated following each purchase.

Calculation of New Cost of Inventory for EACH purchase is as follows ;

Cost per unit = Total Cost / Total Units

May 7- 200 units at $ 4.20

Cost per unit = ((150 ×$4.00)+ (200 × $ 4.20))/ (150+ 200)

                      = $4.11

June 11 -200 units at $ 4.40

Cost per unit = ((350 ×$4.11)+ (200 × $ 4.40))/ (350+ 200)

                      = $4.22

November 22 -250 units $ 4.80

Cost per unit = ((550 ×$4.22)+ (200 × $ 4.80))/ (550+ 250)

                      = $4.10

Therefore Cost per Unit During the year is $4.10.

Cost of Goods Sold Calculation:

Cost of goods sold = Number of Goods Sold × Cost per Unit

                                = 570 × $4.10.

                                = $ 2,337