Practice Questions, Question 4 Towne Electronics Co. uses a perpetual inventory

Question

Practice Questions, Question 4 Towne Electronics Co. uses a perpetual inventory system. The company's beginning inventory of a particular style of large screen televisions and its purchases during the month of January were as follows: QuantityUnit Cost 40 20 10 20 Total Cost S 8,000 Beginning inventory (Jan. I) Purchase (Jan. 12) Purchase (Jan. 28) Total S200 221 158 4,420 $14,000 On January 15, Towne Electronics Co. held its annual Large Screen TV Sale Day. On this day, 55 of these televisions were sold. The remaining 15 units remain in inventory at January 31. Assuming that Towne Electronics uses the average cost formula, the cost of goods sold to be recorded at January 15 is $11,385 $11,315 $11,000 $2,615

Explanation / Answer

Average cost per unit as on 15 Jan = cost of goods available for sale / total number of units

Average cost per unit as on 15 Jan = $12,420 / 60

Average cost per unit as on 15 Jan = $207

Cost of goods sold as on 15 Jan = $207*55 units

Cost of goods sold as on 15 Jan = $11,385

Answer is $11,385

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