Question

A company uses a perpetual inventory system. The company's beginning inventory of shoes and the purchases during a month as as follows:

Beginning Inventory Jan 1: 16 pairs at $10 ea

Purchase Jan 11: 14 pairs @ $12 ea

Purchase Jan 20: 23 pairs at $15 ea

On Jan 14 the company sold 25 units of shoes. The other 28 units remained in inventory at Jan 31.

Question 1: Assuming the company uses the average cost flow assumption what is the cost of goods sold to be recorded on Jan 14 (round to the nearest cent).

cost per unit=total cost available for sale/total units available for sale

328/30=10.9

23*10.9=250.7

Question 2: The total cost of goods available for sale is $673. Assuming average cost flow what would the ending inventory be on Jan 31?

COGS/Total pairs available for sale?

Answer 1

Correct Answer:

Requirement 1:

Cost of goods sold to be recorded on 14- Jan = $ 328.00

Cost of Goods sold
		Units	Cost per unit	value
Beginning Inventory				$                                -
Purchases
				$                                -
14-Jan		25	$                         10.93	$                       273.25
Total		25		$                       273.25

Cost of Goods Available for sale
		Units	Cost per unit	value
Beginning Inventory		16	$                         10.00	$                       160.00
Purchases
11-Jan		14	$                         12.00	$                       168.00
Total		30		$                       328.00

Weighted Average Cost Per unit
Units		(A)	30
Total Cost		(B)	$                      328.00
Average Cost		(C=B/A)	$                         10.93

Requirement 2:

The Ending inventory = $ 00.00

Working:

	FIFO
A	Total Units Available for sale			53		$                673.00
	Units Sold			53
	Ending Inventory Units			0
	Valuation
	Cost of Goods Sold		25		$                         10.93	$                273.33
			28		$                         14.27	$                399.67
B	Total Cost of Goods Sold		53	units		$                673.00
A-B	Ending Inventory		0	units		$                         0

End of answer.

Thanks.