Question

The Boxwood Company sells blankets for $60 each. The following was taken from the inventory records during May. The company had no beginning inventory on May 1.

Date	Blankets	Units	Cost
May 3	Purchase	5	$30
10	Sale	3
17	Purchase	10	$34
20	Sale	6
23	Sale	3
30	Purchase	10	$40

Assuming that the company uses the perpetual inventory system, determine the gross profit for the sale of May 23 using the average inventory cost method.

Answer 1

Solution :
	Average Cost Method
			COST OF GOODS AVAILABLE FOR SALE	COST OF GOODS SOLD	ENDING INVENTORY
	Date	Particulars	No. of Units	Cost Per unit	Total	No. of Units	Cost Per unit	Cost of Goods Sold	No. of Units	Cost Per unit	Ending invetory
	May.03	Purchases	5	$                     30.00	$150				5	$         30.00	$150
	May.10	Sales				3	$             30.00	$90	2	$         30.00	$60
	May.17	Purchases	10	$                     34.00	$340				12	$         33.33	$400
	May.20	Sales				6	$             33.33	$200	6	$         33.33	$200
	May.23	Sales				3	$             33.33	$100	3	$         33.33	$100
	May.30	Purchases	10	$                     40.00	$400				13	$         38.46	$500
		Total / Ending Balance	25		$890	12		$390	13	$         38.46	$500
		CALCULATION OF GROSS PROFIT FOR SALE OF MAY 23
		Sales (3 units X $ 60)	$                    180
		Less: Cost of Good Sold	$                    100
		Gross Profit	$                      80
	Answer = Gross Profit = $ 80