Question

Problem 6-08A al-a 2 (Part Level Submission) Oriole Company is a retailer operating in Calgary, Alberta. Oriole uses the perpetual inventory method. Assume that there are no credit transactions; all amounts are settled in cash. You are provided with the following information for Oriole for the month of January 2022. Quantity 175 Description Ending inventory Purchase Sale Unit Cost or Selling Price $20 28 105 193 44 Date Dec. 31 Jan. 2 Jan. 6 Jan. 9 Jan. 10 Jan. 23 Jan. 30 Purchase 58 25 50 Sale Purchase Sale 105 125 47 (al)

Calculate the average cost for each unit (round 3 decimal places):

Jan 1

Jan 2

Jan 6

Jan 9

Jan 10

Jan 23

Jan 30

Answer 1

Average cost is the division of total cost by the number of units.

Jan 1: (175 × $20) / 175 = 3,500 / 175 = $20 (Answer)

Jan 2: [(175 × $20) + (105 × $28)] / (175 + 105) = (3,500 + 2,940) / 280 = 6,440 / 280 = $23 (Answer)

Jan 6: same as Jan 2 since there is no purchase = $23 (Answer)

Jan 9: sale of 193 units should be considered here = [6,440 – (193 × 23) + (58 × 25)] / (280 – 193 + 58) = (6,440 – 4,439 + 1,450) / 145 = 3,451 / 145 = 23.8 (Answer)

Jan 10: same as Jan 9 since there is no purchase = $23.8 (Answer)

Jan 23: sale of 50 units should be considered here = [3,451 – (50 × 23.8) + (105 × 27)] / (145 – 50 + 105) = (3,451 – 1,190 + 2,835) / 200 = 5,096 / 200 = $25.48 (Answer)

Jan 30: same as Jan 23 since there is no purchase = $25.48 (Answer)