Question

A company has a beginning inventory of $20,000 and purchases during the year of $130,000.

The beginning inventory consisted of 1,000

units and 6,000 units were purchased during the year. The company has 3,000

units left at year−end. Under average−​cost,

what is Cost of Goods​ Sold? (Round any intermediary calculations to two decimal places and your final answer to the nearest​ dollar.)

Answer 1

Answer :

Calculation of Cost of Goods Sold:
Particulars		In units
Opening Inventory		1000
Purchases		6000
Closing Inventory		3000
Cost of Gold Sold (Units)		4000
(Formula : COGS = Opening + Purchases -Closing)

Working note 1.

Weighted Average Cost of Inventory
Particulars	Units	Amount
Opening Inventory	1000	20000
Purchases	6000	130000
Total	7000	150000
Weighted Average Cost = Total Amount/ Total Units
Weighted Average Cost Per Unit	21.43
	150000/7000

Therefore,

COGS = 21.43* 4000 Units

=85714.29

Answer = $85714.29

• Actual total cost of all inventory is $150,000 ($20,000 beginning inventory + $130,000 purchased) and total units of inventory is 7000 (1000 beginning inventory + 6000 purchased)
• The weighted average cost per unit therefore is $21.43 ($150,000 ÷ 7000 units)
• Ending inventory valuation is $64285.71 (3000 units × $21.43 weighted average cost) and COGS valuation is $85714.29 (4000 units × $21.43 weighted average cost)
• The total of these two amounts equals the $150000 total actual cost of all purchases and beginning inventory