Question

Coronado uses the periodic inventory system. For the current month, the beginning inventory consisted of 7100 units that cost $11.00 each. During the month, the company made two purchases: 2800 units at $12.00 each and 11800 units at $12.50 each. Coronado also sold 12800 units during the month. Using the average cost method, what is the amount of cost of goods sold for the month

Answer 1

Answer:

$149,376

Explanation:

For computing the amount of cost of goods sold using the average cost method we need to first find the average cost per unit which is shown below:

= (Beginning inventory units × price per unit + first purchase inventory units × price per unit + second purchase inventory units × price per unit ) ÷ (Beginning inventory units + first purchase inventory units + second purchase inventory units)

= (7,100 units × $11 + 2,800 units × $12 + 11,800 units × $12.5) ÷ (7,100 units + 2,800 units + 11,800 units)

= ($78,100 + $33,600 + $141,600) ÷ (21,700 units)

= ($253,300) ÷ (21,700 units)

= $11.67 per unit

Now the cost of goods sold equals to

= 12,800 units × $11.67 per unit

= $149,376

We simply applied the above formula