Asked by Linda Rydberg on Jun 16, 2024
Verified
The following information is available for Clancy Company: Beginning inventory 600 units at $4 First purchase 900 units at $6 Second purchase 500 units at $7.20\begin{array}{ll}\text { Beginning inventory } & 600 \text { units at } \$ 4 \\\text { First purchase } & 900 \text { units at } \$ 6 \\\text { Second purchase } & 500 \text { units at } \$ 7.20\end{array} Beginning inventory First purchase Second purchase 600 units at $4900 units at $6500 units at $7.20 Assume that Clancy uses a periodic inventory system and that there are 760 units left at the end of the month.
Instructions
Compute each of the following under the average-cost method:
(a) Cost of ending inventory.
(b) Cost of goods sold.
Average-Cost Method
An inventory valuation method that calculates stock value based on the average cost of goods available for sale during the period.
Ending Inventory
Refers to the total value of goods available for sale at the end of an accounting period, not yet sold.
- Estimate the final inventory worth and the cost of goods sold through various inventory valuation strategies.
Verified Answer
TM
Talal MahmoodJun 22, 2024
Final Answer :
Average cost/unit =$5.70($11,400÷2,000)600×$4=$2,400900×$6=5,40050000‾×$7.20=3.600‾2,000‾‾$11,400‾‾\begin{array} { l } \text { Average cost/unit } = \$ 5.70 ( \$ 11,400 \div 2,000 ) \\\\600 \times \$ 4 = \$ 2,400 \\900 \times \$ 6 = \quad 5,400 \\\underline { 50000 } \times \$ 7.20 = \underline { 3.600 }\\ \underline { \underline { 2,000 } } \quad\quad\quad\quad\underline { \underline { \$11,400}}\\\end{array} Average cost/unit =$5.70($11,400÷2,000)600×$4=$2,400900×$6=5,40050000×$7.20=3.6002,000$11,400 (a) Cost of ending inventory = $4332 (760 × $5.70)
(b) Cost of goods sold = $7068 (1240 × $5.700) or $11400 - $4332
(b) Cost of goods sold = $7068 (1240 × $5.700) or $11400 - $4332
Learning Objectives
- Estimate the final inventory worth and the cost of goods sold through various inventory valuation strategies.
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