Question

A company purchased 400 units for $ 40 each on January 31. It purchased 250 units for $ 25 each on February 28. It sold a total of 300 units for $ 80 each from March 1 through December 31. If the company uses the weightedminusaverage inventory costing​ method, calculate the cost of ending inventory on December 31.​ (Assume that the company uses a perpetual inventory system. Round any intermediate calculations two decimal​ places, and your final answer to the nearest​ dollar.)

Answer 1

$11,980.77

Step-by-step explanation:

Given;

On January 31

Units purchased= 400

Cost of each unit = $40

On February 28

Units purchased = 250

Cost of each unit = $25

Units sold from March 1 through December 31 = 300

Selling cost of each unit = $80

Now,

Average cost per unit =
`\frac{\textup{Total purchasing cost}}{\textup{Total units purchased}}`

or

Average cost per unit =
`\frac{\textup{400}*\$40+250*\$25}{\textup{400 + 250}}`

or

Average cost per unit =
`\frac{\textup{22,250}}{\textup{650}}`

or

Average cost per unit = $34.23

Ending inventory on December 31 = Total units purchased - Total units sold

= 400 + 250 - 300

= 350 units

Therefore,

The cost of ending inventory = Units in the inventory × Cost per unit

= 350 × $34.23

= $11,980.77