Amsterdam Company uses a periodic inventory system. For April, when the company

Question

Amsterdam Company uses a periodic inventory system. For April, when the company sold 700 units, the following information is available.

350

5,950

1,000

$15,200

Compute the April 30 inventory and the April cost of goods sold using the average cost method. (Round computations for cost per unit to 2 decimal places, e.g. 10.25 and answers to 0 decimal places, e.g. 2,250.)

Units Unit Cost Total Cost April 1 inventory 250 $13 $3,250 April 15 purchase 400   15 6,000 April 23 purchase

350

  17

5,950

1,000

$15,200

Amsterdam Company uses a periodic inventory system. For April, when the company sold 700 units, the following information is available. Compute the April 30 inventory and the April cost of goods sold using the average cost method. (Round computations for cost per unit to 2 decimal places, e.g. 10.25 and answers to 0 decimal places, e.g. 2,250.)

Explanation / Answer

Hi,

Please find the answer as follows:

Total Units Available for Sale = 250 (Opening Inventory) + 400 (April 15 purchase) + 350 (April 23 purchase) = 1000 units

Units Sold = 700 units

Ending Inventory (Units) = Total Units Available for Sale - Units Sold = 1000 - 700 = 300 Units

Part A:

Average Cost = Total Cost/Total Units Available for Sale = 15200/1000 = 15.2

Value of Ending Inventory = Ending Inventory (Units)*Average Cost = 300*15.2 = $ 4560

Answer is $ 4560

Part B:

Cost of Goods Sold = Number of Units Sold*Average Cost = 700*15.2 = 10640

Answer is 10640.

Thanks.

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