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 :
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
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