Question

Crane uses the periodic inventory system. For the current month, the beginning inventory consisted of 7000 units that cost $9.00 each. During the month, the company made two purchases: 2800 units at $10.00 each and 11800 units at $10.50 each. Crane also sold 12700 units during the month. Using the average cost method, what is the amount of cost of goods sold for the month?

Answer 1

Sol - The calculation of the above is given as follows -

Inventory in the beginning = 7000 * $9

=$63,000

Purchase 1st = 2800 * $10

= $28,000

Purchase 2nd = 11800 * $10.50

= $123,900

Total = $63,000 + $28,000 + $123,900

= $214,900

We will add the total number of units to calculate the average = 11800 + 2800 +7000 = 21600

Average cost per unit is = $214,900 / 21,600

= $9.94

Cost of goods sold = 12,700 * $9.94 = $126,238

Therefore, the Cost of Goods sold during the month is $126,238