In: Accounting
Arizona Inc. uses the perpetual inventory system, and recorded the following data pertaining to raw material X during January 2018:
Units
Date Received Cost Issued On Hand
Jan 1 Inventory $4.50 3,200
Jan 11 Sale ($18) 1,600 1,600
Jan 15 Purchase 1,000 $4.70 2,600
Jan 17 Sale ($18) 1,100 1,500
Jan 25 Purchase 1,500 $4.90 3,000
Round your answer to two decimals.
Instructions:
a)Under moving average method ,average cost per unit is calculated at the time of every purchase .
Formula :Average cost per unit =Cost of inventory available for sale/Units available for sale
MOVING WEIGHTED AVERAGE METHOD | |||||||||
DATE | PURCHASE | COST OF SALES | INVENTORY AT END | ||||||
Quantity | Unit cost | Total | Quantity | Unit cost | Total | Quantity | Unit cost | Total | |
Jan 1 | 3200 | 4.50 | 14400 | ||||||
Jan 11 | 1600 | 4.50 | 7200 | 3200-1600=1600 | 4.50 | 7200 | |||
Jan 15 | 1000 | 4.70 | 4700 | 1600+1000=2600 |
[7200+4700]/2600 11900/2600 4.58 |
11900 | |||
Jan 17 | 1100 | 4.58 | 5038 | 2600-1100=1500 | 4.58 | 6862 | |||
Jan 25 | 1500 | 4.9 | 7350 | 1500+1500=3000 |
[6862+7350]/3000 4.74 |
14212 | |||
Total | 12238 |
Sales revenue
Units sales | 1600+1100=2700 |
unit selling price | 18 |
Total sales revenue | 48600 |
Cost of goods sold | 12238 |
Gross profit (sales -cost of sales )) | 48600-12238 = 36362 |
Inventory as on Jan 31 | 14212 |
2)
Quantity | * | Unit cost | = | total | |
Beginning | 3200 | 4.5 | 14400 | ||
Jan 15 | 1000 | 4.7 | 4700 | ||
Jan 25 | 1500 | 4.9 | 7350 | ||
Total | 5700 | 26450 |
Average cost per unit = 26450 /5700
= $ 4.64
Cost of goods sold (unit sold *average cost per unit) | 2700*4.64=12528 |
Gross profit (sales -cost of sales )) | 48600-12528= 36072 |
Inventory as on Jan 31 (cost of goods available for sale -cost of sales) | 26450-12528 = 13922 |