Question

The following information is taken from the inventory records of the CNB Company for the month of September: Beginning inventory, 9/1/2018 Purchases: 8,000 units e $10.00 6,000 units $10.70 9,000 units $12.60 9/7 9/25 Sales 8,000 units 9,000 units 9/10 9/29 6,000 units were on bhand at the end of September. Required: 1. Assuming that CNB uses a periodic inventory system and employs the average cost method, determine cost of goods sold for September and September's ending inventory. 2. Repeat requirement 1 assuming that the company uses a perpetual inventory system.

Answer 1

1) Periodic average cost method

Sales units= 8000+9000= 17000 units

Average Cost	Cost of goods available for sale			Cost of goods sold- Average cost			Ending inventory- Average cost
	# of units	Unit cost	Cost of goods available for sale	# of units sold	Average cost per unit	Cost of goods sold	# of units in ending inventory	Average cost per unit	Ending inventory
Beginning inventory	8000	$10.00	$80000
Purchases:
9/7	6000	$10.70	64200
9/25	9000	$12.60	113400
Total	23000		$257600	17000	$11.20	$190400	6000	$11.20	$67200

Average cost per unit= Cost of goods available for sale/Number of units

= $257600/23000= $11.20 per unit

2) Perpetual average cost method

Perpetual Average	Inventory on hand			Cost of Goods Sold
	# of units	Cost per unit	Inventory Value	# of units sold	Average cost per unit	Cost of Goods Sold
Beginning inventory	8000	$10.00	$80000
Purchases- September 7	6000	$10.70	64200
Subtotal average cost	14000	(144200/14000)= $10.30	$144200
Sale- September 10	8000	$10.30	82400	8000	$10.30	$82400
Subtotal average cost	6000	(61800/6000)= $10.30	$61800
Purchases- September 25	9000	$12.60	$113400
Subtotal average cost	15000	(175200/15000)= $11.68	$175200
Sale- September 29	9000	$11.68	$105120	9000	$11.68	$105120
Total	6000	$11.68	$70080	17000		$187520