Question

During the year, Wright Company sells 470 remote-control airplanes for $110 each. The company has the following inventory purchase transactions for the year. Date Transaction Number of Units Unit Cost Total Cost Jan. 1 Beginning inventory 60 $ 82 $ 4,920 May. 5 Purchase 250 85 21,250 Nov. 3 Purchase 200 90 18,000 510 $ 44,170 Calculate ending inventory and cost of goods sold for the year, assuming the company uses weighted-average cost.

Answer 1

Answer:

Units of inventory = 40 units

Value the closing inventory =  $ 3,464.31

Cost of goods sold =  $40,705.69

Explanation:

To value inventory, The weighted average inventory method uses the value of weighted average price of all the batches purchased till date. The weighted average price is re-computed whenever a new batch of stock is received.

Weighted average cost = Total value of stock/ Total units

Step 1

Calculate the weighted average price

For Wright, we can work out the weighted average price as follows:

Weighted average cost = Total value of stock/ Total units

The total quantity purchased  plus opening inventory before sales is 510 units

step 1

Weighted average price

= $44,170/ 510 units

= $86.607

Step 2

Calculate the closing inventory units

Closing inventory = opening inventory + purchases - sales

=510-470

= 40 units

Step 3

Value the closing inventory

= 40 × $86.60784314

= $ 3,464.31

step 4

Cost of goods sold

= 470 ×   $86.60

= $40,705.69

Units of inventory = 40 units

Value the closing inventory =  $ 3,464.31

Cost of goods sold =  $40,705.69