Question

A company had the following purchases and sales during its first month of operations:

January 1	Purchased 10 units at $4.00 per unit
January 9	Sold 6 units at $12.00 per unit
January 17	Purchased 8 units at $5.50 per unit
January 27	Sold 7 units at $12.00 per unit

Using the Perpetual weighted average method, what is the value of cost of goods sold? (Round weighted average costs per unit to 2 decimal places.)

A)$40.00

B)$59.00

C)$25.00

D)$24.00

E)$23.35

Using the Periodic weighted average method, what is the value of cost of goods sold? (Round weighted average costs per unit to 2 decimal places.)

A)$84

B)$61

C)$23

D)$27

E)$5

Answer 1

Using Perpectual weighted average method, the weighted average is calculated after every purchase.

Cost of goods sold = (6 units * $4.00) + (7 units * $5.00)

= $24 + $35

= $59

$4.00 comes from first purchased.

$5.00 = [(4 units * $4) + (8 units * $5.50)]/12 units

$59 is the correct answer.

Under periodic weighted method,

Weighted average = (Total purchases / Total units)

Total purchases = 10 units * 4.00 + 8 units * $5. 50

= $84

Total units = 18 units (10 + 8)

Weighted average = $84 / 18

= $4.67

Cost of good sold = Weighted average * units sold

= $4.67 * (6 + 7)units

= $4.67 * 13 units

= $61

Option $61 is the correct answer.