Chapter 6: 13SE (page 360)

Question:The periodic inventory records of Flexon Prosthetics indicate the following for the month of July:
Jul. 1 Beginning merchandise inventory 6 units @ $ 60 each
8 Purchase 5 units @ $ 67 each
15 Purchase 10 units @ $ 70 each
26 Purchase 5 units @ $ 85 each
At July 31, Flexon counts four units of merchandise inventory on hand.
Compute ending merchandise inventory and cost of goods sold for Flexon using theweighted-average inventory costing method.

Short Answer

Expert verified

Ending Inventory:$280

Cost of goods sold:$1,540

Step by step solution

Step-by-Step-SolutionStep1: Computation on ending inventory under periodic inventory weighted average

In weighted average under periodic inventory, the cost of issued inventory is valued at the average prices. So the ending inventory would also be valued at average prices.

So in the given case, the cost of ending inventory would be as follow –

$A v e r a g e C o s t = \frac{O p e n i n g i n v e n t o r y + T o t a l P u r c h a s e}{T o t a l I n v e n t o r y} = \frac{6 \times $ 60 + (5 \times $ 67 + 10 \times $ 70 + 5 \times $ 85)}{6 + 5 + 10 + 5} = \frac{$ 1, 820}{26} = $ 70$

$E n d i n g i n e v n t o r y v a l u e = E n d i n g i n v e n t o r y (u n i t s) \times A v e r a g e C o s t = 4 \times $ 70 = $ 280$

Computation of cost of goods sold

$C o s t o f g o o d s s o l d = O p e n i n g i n v e n t o r y + T o t a l P u r c h a s e - E n d i n g i n v e n t o r y = 6 \times $ 60 + (5 \times $ 67 + 10 \times $ 70 + 5 \times $ 85) - $ 280 = $ 360 + $ 1, 460 - $ 280 = $ 1, 540$

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Short Answer

Step by step solution

Step-by-Step-SolutionStep1: Computation on ending inventory under periodic inventory weighted average

Computation of cost of goods sold

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