Question

Checkers uses the periodic inventory system. For the current month, the beginning inventory consisted of 4,800 units that cost $12 each. During the month, the company made two purchases: 2,000 units at $13 each and 8,000 units at $13.50 each. Checkers also sold 8,600 units during the month. Using the average cost method, what is the amount of cost of goods sold for the month?

Answer 1

Using the average cost method, the cost of goods sold (COGS) for the month for Checkers is calculated as $111,370. This is found by first determining the average cost per unit of $12.95, and then multiplying by the number of units sold.

Step-by-step explanation:

To calculate the cost of goods sold (COGS) using the average cost method for Checkers, we must first determine the average cost per unit. We do this by adding the total cost of all inventory purchases to the beginning inventory cost, and then dividing by the total number of units available.

Here's the calculation:

• Beginning inventory: 4,800 units at $12 each = $57,600
• First purchase: 2,000 units at $13 each = $26,000
• Second purchase: 8,000 units at $13.50 each = $108,000
• Total cost of inventory = $57,600 + $26,000 + $108,000 = $191,600
• Total units available = 4,800 + 2,000 + 8,000 = 14,800 units
• Average cost per unit = $191,600 / 14,800 units = $12.95 per unit

Now, to find the COGS, we multiply the average cost per unit by the number of units sold:

COGS = 8,600 units x $12.95 per unit = $111,370

Therefore, using the average cost method, the amount of cost of goods sold for the month is $111,370.