Question

"Palmer Company's beginning inventory consists of 1,000 units at $1.00 per unit. During the year, the company purchases 5,000 units costing a total of $5,800. At the end of the accounting period, Palmer still has 1,000 units on hand. If Palmer uses the weighted average cost method, its cost of goods sold (rounded to the nearest dollar) will be"

Answer 1

Cost of goods sold = $5,650

Step-by-step explanation:

Total number of units sold = Beginning inventory + Purchase of raw materials - Ending Inventory

Total number of units sold = 1,000 units + 5,000 units - 1,000 units

Total number of units sold = 5,000 units

Beginning Inventory = 1,000 units × $1.00 per unit = $1,000

Purchase = 5,000 units × $1.16 per unit = $5,800

Total ending inventory before the sale but after the purchase of new inventory = 1,000 units + 5,000 units = 6,000 units

Total ending inventory cost before the sale but after the purchase of new inventory = $1,000 + $5,800 = $6,800

We know, weighted average cost method = Total cost ÷ Total inventory

weighted average cost method = $6,800 ÷ 6,000 units

weighted average cost method = $1.13 (rounded to nearest dollar)

Therefore, cost of goods sold = Total number of units sold × cost per unit

cost of goods sold = 5,000 units × $1.13 = $5,650