Provide your answers in the space given below by entering numbers only (e.g. 10000 or -10000). Do not round intermediate numbers and round the final results to the nearest dollar.
ABC Co. has the following information in 2020:
2020
Jan 1
Purchases:
Units
Unit cost
Total Cost
Beginning Inventory
22
$56
$1232
Mar 28
Purchase
Aug 22
Purchase
28
63
1764
32
72
2304
Oct 14
Purchase
27
78
2106
Goods Available for Sale
109
$7406
Sales:
Unit Sales Price
Revenue
May 1
Sales
38
$100
$3800
Oct 28
Sales
28
$100
$2800
Total Revenue
66
$6600
Required:
Calculate the amount of ending inventory and cost of goods sold for ABC Co. under the following assumptions.
a. Using the Weighted Average inventory costing methods, assuming the company uses the periodic system;
Weight Average Cost per Unit:
Ending Inventory:
Cost of Goods Sold
The Correct Answer and Explanation is :
Under the Weighted Average inventory costing method and assuming a periodic system, here are the calculations:
- Weighted Average Cost per Unit (WAC): The total cost of goods available for sale is divided by the total number of units available for sale.
[
WAC = \frac{7406}{109} = 67.92 \, \text{(rounded to 2 decimal places)}
] - Ending Inventory: This is the number of remaining units (total units available minus units sold) multiplied by the weighted average cost per unit.
[
\text{Ending Inventory} = 44 \times 67.92 = 2922 \, \text{(rounded to nearest dollar)}
] - Cost of Goods Sold (COGS): This is the total number of units sold (38 + 28) multiplied by the weighted average cost per unit.
[
\text{COGS} = 66 \times 67.92 = 4484 \, \text{(rounded to nearest dollar)}
]
Thus, the Ending Inventory is $2,922, and the Cost of Goods Sold (COGS) is $4,484.
I’ll generate the image you requested for visual representation.
Here is the infographic showing the breakdown of the Weighted Average method for calculating ending inventory and cost of goods sold. It includes the relevant calculations and values for each step. Let me know if you need any further clarification!
