Question

2.

Average-Cost Method: Periodic Inventory System

Assume the following data with regard to inventory for Vegan Company:

Aug. 1		Inventory	40		units @ $10 per unit	$ 400
8		Purchase	50		units @ $11 per unit	550
22		Purchase	35		units @ $12 per unit	420
Goods available for sale			125		units	$1,370
Aug. 15		Sale	58		units
28		Sale	25		units
Inventory, Aug. 31			42		units

Calculate the cost of ending inventory and cost of goods sold according to the average-cost method under the periodic inventory system. In your calculations round average unit cost to the nearest cent and round your final answers to the nearest dollar.

	Average-Cost method
Cost of ending inventory:	$
Cost of goods sold:	$

Answer 1

Under periodic system, Weighted average method is used.

Total number of units available for sale (beginning inventory + purchases) = 40+50+35 = 125

Cost of units available for sale (beginning inventory + purchases) = 400+550+420 = 1,370

Weighted average unit cost = Cost of units available for sale / Number of units available for sale

= 1,370 / 125

= 10.96

Ending inventory in units = 42

Cost of ending inventory = ending inventory in units * 10,96 per unit

= 42 * 10.96 = 460.32

Sales in units = 58+25 = 83

Cost of goods sold = Number of units sold * 10.96 per unit

= 83 * 10.96

= 909.68

	Average cost method
Cost of ending inventory	460.32
Cost of goods sold	909.68