Question

Jammer Company uses a weighted average perpetual inventory system and reports the following:

August 2 Purchase 24 units at $18.50 per unit. August 18 Purchase 26 units at $20.00 per unit. August 29 Sale 48 units. August 31 Purchase 29 units at $21.50 per unit.
What is the per-unit value of ending inventory on August 31? (Round your per unit answers to 2 decimal places.)

Answer 1

Answer: $21.36

Step-by-step explanation:

Weighted average inventory system works by taking the average of the inventory prices on the different days.

Price on August 29 which is date of sale:

= {(Units purchased on August 2 * Unit cost on August 2) + ( Units purchased on August 18 * Unit cost on August 18)] / (Units purchased on August 2 + Units purchased on August 18)

= [ ( 24 * 18.50) + (26 * 20) ] / (24 + 26)

= $19.28 per unit

48 units were sold so the number of units left are:

= 24 + 26 - 48

= 2 units

Price on August 31

= [ (Units remaining on August 29 * Unit cost on August 29) + ( Units purchased on August 31 * Unit cost on August 31)] / (Units remaining on August 29 + Units purchased on August 31)

= [ (2 * 19.28) + (29 * 21.50) ] / ( 2 + 29)

= $21.36