Question

Having some trouble. Please explain the answer. Thanks.

Altira Corporation provides the following information related to its merchandise inventory during the month of August 2021:

Aug.1	Inventory on hand—3,600 units; cost $7.70 each.
8	Purchased 18,000 units for $7.10 each.
14	Sold 14,400 units for $13.60 each.
18	Purchased 10,800 units for $6.60 each.
25	Sold 13,400 units for $12.60 each.
28	Purchased 5,600 units for $5.80 each.
31	Inventory on hand—10,200 units.

2. Using calculations based on a perpetual inventory system, determine the inventory balance Altira would report in its August 31, 2021, balance sheet and the cost of goods sold it would report in its August 2021 income statement using the Average cost method. (Round "Average Cost per Unit" to 2 decimal places.)

	Perpetual Average Inventory on hand Cost of Goods Sold Inventory Balance # of units Cost per unit Inventory Value # of units sold Avg.Cost per unit Cost of Goods Sold # of units in ending inventory Cost per unit Ending inventory Beginning Inventory Purchase - August 8 0 $0 Sale - August 14 Purchase - August 18 0 $0 Sale - August 25 Purchase - August 28 Total 0 $0 $0 0 $0

Answer 1

Altira Corporation
Perpetual Inventory System
Inventory sheet - Average weighted cost
	Inv on hand				Cost of goods sold				Inventory Balance
Date	# of units	Cost per unit	Inv Value		# of units	Avg Cost per unit	COGS		# of units	Cost per unit	Ending Inv		Calculation
Beginning Inventory	3,600	$               7.70	27,720.00						3,600	$              7.70	27,720.00
Purchase - August 8	18,000	$               7.10	127,800.00						18,000	$              7.10	127,800.00
Totals									21,600	$              7.20	155,520.00		=155,520/21,600=7.20 per unit
Sale - August 14					14,400	$                 7.20	103,680.00		7,200	$              7.20	51,840.00
Purchase - August 18	10,800	$               6.60	71,280.00						10,800	$              6.60	71,280.00
Totals									18,000	$              6.84	123,120.00		=123,120/18,000=6.84 per unit
Sale - August 25					13,400	$                 6.84	91,656.00		4,600	$              6.84	31,464.00
Purchase - August 28	5,600	$               5.80	32,480.00						5,600	$              5.80	32,480.00
Totals	38,000		259,280.00		27,800		195,336.00		10,200	$              6.27	63,944.00		=63,944/10,200=6.27 per unit

Explanations

Average cost per unit is calculated as Cost of goods available for sale divided by Number of units available for sale

So, after purchase of Aug 8, Number of units available for sale = Beg. Inv. + Purchases = 3,600+18,000 = 21,600 units

Cost of goods available for sale = Beg. Inv. + Purchases = 27,720+127,800 = $155,520

Then, Average cost per unit will be $155,520 / 21,600 units = $7.20 per unit

Sale - August 14

The Sale on August 14 of 14,400 units will then be valued at average cost of $7.20 per unit to get $103,680