6. Average-Cost Method: Perpetual Inventory System Assume the following data wit

Question

6. Average-Cost Method: Perpetual Inventory System

Assume the following data with regard to inventory for Vegan Company:

Calculate the cost of ending inventory and cost of goods sold according to the average-cost method under the perpetual inventory system. In your calculations round average unit cost to the nearest cent and round all other calculations and your final answers to the nearest dollar.

Aug. 1 Inventory 40 units @ $10 per unit $ 400 8 Purchase 50 units @ $11 per unit 550 22 Purchase 35 units @ $12 per unit 420 Goods available for sale 125 units $1,370 Aug. 15 Sale 45 units 28 Sale 25 units Inventory, Aug. 31 55 units

Explanation / Answer

Cost of Ending Inventory = 55 X $10.96 = $        603 Cost of goods sold (45 + 25) = 70 X $10.96 = $        767 Cost of goods available for sale Average Cost # of units Cost per unit Cost of goods available for sale Beginning Inventory               40 $        10.00 $        400 Purchases: Aug-08               50 $        11.00 $        550 Aug-22               35 $        12.00 $        420 125 $    1,370 *Average Cost = Cost of goods available for sale / No. Of units = $1,370 / 125 units = $ 10.96

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