Question

In: Accounting

Arizona Inc. uses the perpetual inventory system, and recorded the following data pertaining to raw material...

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:

Determine the cost of sales, gross profit and inventory value of raw material X inventory at January 31, 2018 using the moving-weighted average method.

Determine the cost of sales, gross profit and inventory value of raw material X inventory at January 31, 2018 using the average cost method.

Expert Solution

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

ekkarill92 answered 2 years ago

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