Question

Weighted Average Cost Flow Method Under Perpetual Inventory System The following units of a particular item were available for sale during the calendar year: Jan. 1 Inventory 30,000 units at $30.00 Mar. 18 Sale 24,000 units May 2 Purchase 54,000 units at $31.00 Aug. 9 Sale 45,000 units Oct. 20 Purchase 21,000 units at $32.10The firm uses the weighted average cost method with a perpetual inventory system. Determine the cost of merchandise sold for each sale and the inventory balance after each sale. Present the data in the form illustrated in Exhibit 5. Round unit cost to two decimal places, if necessary.

Answer 1

Answer:

Mar. 18 Sale 24,000 units

(a)cost of merchandise sold

cost of merchandise sold=$30.00×24,000units

                                          =$720000

(b) inventory balance after each sale

cost of merchandise sold=$30.00× (30000units-24000units)

                                          =$30.00×6000units

                                          =$180000

Aug. 9 Sale 45,000 units

(a)cost of merchandise sold

cost of merchandise sold=$30.90×45,000units

                                          =$1390500

(b) inventory balance after each sale

cost of merchandise sold=$30.90× (60000units-45000units)

                                          =$30.90×15000units

                                          =$463500

Explanation:

The Weighted Average Cost Flow Method calculates a new cost of Inventory after every purchase.

Calculation of New Cost after every purchase is as follows:

May 2 Purchase 54,000 units at $31.00

Total Cost =(54,000units×$31.00)+($30.00×6000units)

                  =$1,854,000

New Unit Cost= $1,854,000/(54,000units+6000units)

                       =$30.90

Oct. 20 Purchase 21,000 units at $32.10

Total Cost =(15,000units×$30.10)+($32.10×21000units)

                  =$1,125,600

New Unit Cost= $1,125,600/(15,000units+21000units)

                       =$31.27