Question

During the year, Wright Company sells 500 remote-control airplanes for $120 each. The company has the following inventory purchase transactions for the year. Date Transaction Number of Units Unit Cost Total Cost Jan. 1 Beginning inventory 40 $ 68 $ 2,720 May. 5 Purchase 270 71 19,170 Nov. 3 Purchase 220 76 16,720 530 $ 38,610 Calculate ending inventory and cost of goods sold for the year, assuming the company uses weighted-average cost.

Answer 1

The weighted-average cost method involves calculating the average cost per unit by dividing the total cost of all inventory by the total number of units. The ending inventory value using this method is $2,185.50, and the cost of goods sold for the year is $36,425.

Step-by-step explanation:

To calculate the ending inventory and the cost of goods sold (COGS) using the weighted-average cost method, we start by determining the average cost per unit. First, we add up the total cost of all inventory purchases including the beginning inventory, and then we divide that by the total number of units to find the average cost per unit.

Calculation Steps:

Compute total cost of beginning inventory and purchases:
Total Cost = $2,720 + $19,170 + $16,720 = $38,610

Compute total number of units:
Total Units = 40 + 270 + 220 = 530 units

Determine the weighted-average cost per unit:
Average Cost = Total Cost / Total Units = $38,610 / 530 units = $72.85 per unit

Calculate the cost of goods sold:
COGS = Units Sold × Average Cost per Unit = 500 × $72.85 = $36,425

Calculate ending inventory:
Ending Inventory = (Total Units - Units Sold) × Average Cost per Unit = (530 - 500) × $72.85 = 30 × $72.85 = $2,185.50

Therefore, the ending inventory value is $2,185.50 and the cost of goods sold for the year is $36,425.

Answer 2

Ending inventory = $2,185.47

Cost of goods sold = $36,424.53

Step-by-step explanation:

500 units sold at $120

Date Transaction Units Unit Cost Total Cost

Jan. 1 Beg. inventory 40 $68 $2,720

May. 5 Purchase 270 $71 $19,170

Nov. 3 Purchase 220 $76 $16,720

Total 530 $72.849 $38,610

Ending inventory = (530 - 500) x $72.849 = $2,185.47

Cost of goods sold = 500 x $72.849 = $36,424.53

When you use the weighted average method, you add the total amount of purchases + beg. inventory, and then divide by the total amount of units.