A company had the following purchases and sales during its first month of operations: January 1 Purchased 10 units at $4.00 per unit January 9 Sold 6 units at $12.00 per unit January 17 Purchased 8 units at $5.50 per unit January 27 Sold 7 units at $12.00 per unit Using the Perpetual weighted average method, what is the value of cost of goods sold? (R

$59

Explanation:

Inventory is valued using various methods which includes LIFO (last in first out), FIFO (first in first out) and weighted average. In the weighted average system, inventory unit cost is determined from the unit cost of all purchases.

January 1 Purchased 10 units at $4.00 per unit

Total cost = 10 × $4

= $40

January 9 Sold 6 units at $12.00 per unit

Cost of items sold = 6 × $4

= $24

Balance left ;

In amount

= $40 - $24

= $16

In units

= 10 - 6

= 4

January 17 Purchased 8 units at $5.50 per unit

Total cost of this purchase

= 8 × $5.50

= $44

Total units available

= 4 + 8

= 12

Unit cost = ($44 + $16)/12

= $5

January 27 Sold 7 units at $12.00 per unit

cost of items sold

= 7 × $5

= $35

Hence the cost of the goods sold

= $24 + $35

= $59

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