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Question 3 --12 View Policies Current Attempt in Progress Marigold Inc. uses the perpetual inventory system and the weighted average cost formula to value inventories. On August 1, there were 6000 units valued at $14400 in the beginning inventory. On August 10, 10000 units were purchased for $8 per unit. On August 15, 8000 units were sold for $11 per unit. The amount charged to cost of goods on August 15 was $30400. $47200 $64000 $34400 Save for Later Attempts: 0 of 1 used Submit Answer

Answer 1

Weighted Average

The weighted average (also called average cost) method of assigning cost requires that we use the weighted average cost per unit of inventory at the time of each sale. The weighted average cost per unit at the time of each sale equals the cost of goods available for sale divided by the units available.

The results using a weighted average (WA) for Marigold Inc are shown in Exhibit below. This exhibit starts with a beginning inventory of 6000 units at $2.4 each and the total value is $ 14,400. On August 10, 10,000 more units costing $8 each are bought for $80,000. Inventory now consists of 6000 units at $2.4 each and 10,000 units at $8 each, for a total of $94,000. The average cost per units for that inventory is $5.9, computed as ($14,400+$80,000)/16,000=$94,400/16,000=$5.9). On August 15, 8000 units are sold. So the amount charged on the cost of goods sold as per the weighted average method on August 15, is $47,200 ($5.9*8000).

Exhibit:

Date	Goods purchased	Cost of goods sold	Inventory balance
August 1	Beginning balance		6000*$2.4=$ 14,400
August 10	10000 units @ $8 each=$80,000		6000*$2.4=$14,400 + 10000*$8=$80,000                                          =$94,400 or $5.9/ units
August 15		8000*$5.9=$47,200	8000*5.9=$47,200

So the answer is option b $ 47,200. The first and third options are the values of goods sold as per FIFO and LIFO methods.