Question

Chris Company uses the perpetual inventory system and had the following activity during the current monthly period.

November 1:             Beginning Inventory of 100 units @$20

November 5:               Purchased 100 units @ $22

November 8:               Purchased 50 units @$23

November 16:            Sold 200 units @ $45

November 19:             Purchased 50 units @ $25

Using the weighted-average inventory method, the company's ending inventory would be reported at:

A)   $2,200.

B) $2,320.

C) $2,250.

D) $2,400.

E) $2,270.

Answer 1

Answers

• Units available for Sale = 100 + 100 + 50 + 50 = 300 units
• Units sold = 200
• Ending Inventory = 300 – 200 = 100 units
• Workings

Average Method	Cost of Goods available for sale
	Units	Cost/unit	COG for sale
Beginning Inventory	100	$                20.00	$                        2,000.00
Purchases:
Nov 5	100	$                22.00	$                        2,200.00
Nov 8	50	$                23.00	$                        1,150.00
Nov 19	50	$                25.00	$                        1,250.00
TOTAL	300	$              22.000	$                        6,600.00

• Weighted average cost per unit on Nov 16 = ($2000 + 2200 + 1150) / (100 + 100 + 50) = $ 21.40
• Cost of Goods Sold = 200 units x $ 21.40 = $ 4280
• Ending Inventory= Cost of Goods available for sale – Cost of Goods Sold
  = $ 6600 - $ 4280
  = $ 2,320
• Correct Answer = Option ‘B’ $ 2,320