Question

A company uses the weighted-average method of inventory valuation under a periodic inventory system. The company began the year with a zero inventory balance. They had the following transactions during the year. 1. Purchased 64 units at $5 per unit 2. Purchased 110 units at $5 per unit 3. Sold 90 units at $10 per unit 4. Purchased 55 units at $6 per unit 5. Sold 90 units at $13.50 per unit At the end of the year, the company counted the inventory and found 49 units remaining. Calculate the cost of goods sold for the year. (Round the unit costs to two decimal places and total costs to the nearest dollar.

Answer 1

Answer:

$935.61

Explanation:

Firstly, we need to calculate weighted average inventory cost at every time anchors (purchase - in or sell - out)

At time t = 1, 64 units @ 5 per unit.

At time t = 2, 64 + 110 = 174 units @ (64 x 5 + 110 x 5)/(64 + 110) = 5 per unit.

At time t = 3, 174 - 90 = 84 units @ 5 per unit.

At time t = 4, 84 + 55 = 139 units @ (84 x 5 + 55 x 6)/(84 + 55) = 5.40 per unit.

At time t = 5, 139 - 90 =  49 units @ 5.40 per unit.

Cost of goods sold for the year = 90 x 5 + 90 x 5.40 = $935.61