Question:
Beginning inventory, purchases, and sales for WCS12 are as follows:
| Oct 1 | Inventory | 300 units at $8 |
| 13 | Sale | 175 units |
| 22 | Purchase | 375 units at $10 |
| 29 | Sale | 280 units |
a. Assuming a perpetual inventory system and using the weighted average method, determine the weighted average unit cost after the October 22 purchase. Round your answer to two decimal places.
b. Assuming a perpetual inventory system and using the weighted average method, determine the cost of the merchandise sold on October 29. Round your 'average unit cost' to two decimal places.
c. Assuming a perpetual inventory system and using the weighted average method, determine the inventory on October 31. Round your 'average unit cost' to two decimal places.
A Perpetual Inventory System is a system of inventory in which all purchases and sales are recorded immediately as and when they occur. Therefore, the perpetual system reflects changes in inventory and inventory on hand at any point of time . Under the perpetual inventory system, inventory is maintained as per any of the three methods: First in First Out (FIFO), Last in First Out (LIFO), and Weighted Average Cost.
Answer and Explanation: 1
a.
Assuming a perpetual inventory system and using the weighted average method, the weighted average unit cost after the October 22 purchase is calculated as:
| 125 units | @ $8 | = 1,000 |
| 375 units | @ $10 | = 3,750 |
| 500 units | = 4,750 |
Hence, the weighted average unit cost of 500 units = 4,750 / 500 = $9.5 per unit.
b.
Assuming a perpetual inventory system and using the weighted average method, the cost of the merchandise sold on October 29 is the same as the weighted average unit cost after the October 22 purchase because the sale is made after the October 22 purchase. Therefore, on October 29, 280 units costing $9.5 per unit are sold out of 500 units available.
Hence, cost of the merchandise sold on October 29 = 280 * $9.5 = $2,660.
c.
Assuming a perpetual inventory system and using the weighted average method, the inventory on October 31 will be
= 500 units - 280 units sold = 220 units
These 220 units will cost $9.5 per unit since it is the balance of the 500 units after the October 22 purchase from which 280 units were sold. Therefore, inventory on October 31 = 220 units @ $ 9.5 = $2,090.
Learn more about this topic:
Recording Purchases Using the Perpetual System
from
Chapter 6 / Lesson 6
The perpetual system is used by updating the inventory account for every purchase and sale. Learn how to record a purchase using the system of double-entry accounting.
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Video Transcript
Hello everyone in this question. The following information has been given to us That on October one inventory years 350 units I think $11 on october 30 there's a sale of 200 units On October 22. Don't support shoes For 350 units At $12 per unit. Mhm. And on October 29 there's a seal. 4 400 units. Now the question has three parts Going to the 1st part. It says that. Mhm Assuming perpetual inventory system. And using the weighted average method, data mined the weighted average unit cost after the October 22 purchase. So waited we need to calculate in first but weighted average unit cost. So for this firstly we'll find out inventory balance. I have 13 October it's a sequel store. 350 units -200 units. Richie gives 1 50 units Which is equal to 1:15 minutes monday flagged by 11. It gives 615. No but you will find a purchase at october 22nd. Mhm. Which is equal to store 315 multiplied by 12. That is it is given in the question that there was a purchase for 350 hundreds and $12 per unit Which is equal to 40 200. Now we can't do it. We didn't have much cost. It is a hard store. 16 50 Plus 40, 200 divided by watch your speed plus 3 15 1 50 is the difference of units over there and 350 is our purchase of units. So on calculating this we'll get 11.7 World Unit. So on a weighted average cost is 11.713. Now moving to the second part of the question, we need to find cost of goods sold on 29th October so sure blast off good soul On 29th October is he going store number of units that is 400 one deployed by Weighted average cost per unit 30 is 11.7 it's a gift 4680. 3rd part, it says we need to calculate ending inventory value. So all 29 doctor 20 ending inventory value On October 29 is equal story Inventory at October 22, that is 500. How are we calculated 500 or You can see 350 units minus 1 20 200 units. We'll get 1 50 units And we land 350 units that this purchase in that. So we'll get 500 units. So Uh, our inventory at October 22, that is 500 units. Finance sail on 29th October which is given to us 400 units which gives us about new of hundreds. Sounds is largely anything inventory brand new, which is equal store 100 multiplied by 11.7 its gifts 1117. So our ending inventory values. 1,107 people. Thank you