Question

Perpetual Inventory Using Weighted Average

Beginning inventory, purchases, and sales for Meta-B1 are as follows:

July 1		Inventory	100 units at $400
12		Sale	70 units
23		Purchase	120 units at $450
26		Sale	110 units

a. Assuming a perpetual inventory system and using the weighted average method, determine the weighted average unit cost after the July 23 purchase.
$per unit

b. Assuming a perpetual inventory system and using the weighted average method, determine the cost of the merchandise sold on July 26.
$

c. Assuming a perpetual inventory system and using the weighted average method, determine the inventory on July 31.
$

Answer 1

Perpectual Inventory: Weighted Average costing method

a. Calculation of weighted average unit cost after the July 23 purchase is as follows:

Weighted average unit cost = [(100-70)* $ 400 + ( 120 * $ 450 ) ] / (100-70+120)

= ( $ 12,000 + $ 54,000 ) / 150

= $ 66,000 / 150

= $ 440 per unit

b. Calculation of cost of the merchandise sold on July 26 is as follows:

Cost of the merchandise sold on July 26 = Number of units sold * weighted average unit cost

= 110 * $ 440

= $ 48,400

Note:

weighted average unit cost = weighted average unit cost of previous purchase. i.e july 23rd

= $ 440 per unit

c.. Calculation of inventory value on July 31 is as follows:

Ending Inventory also valued at weighted average unit cost of previous purchase. i.e july 23rd

Cost of Ending Inventory = Ending inventory units * weighted average unit cost

= 40 units * $ 440

= $ 17,600

Note:

Ending inventory units = Beginning Inventory + Purchases - Sales

= 100 + 120 - ( 70 + 110)

= 100 + 120 - 180

= 40 units