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22 September, 20:11

During the year, Wright Company sells 470 remote-control airplanes for $110 each. The company has the following inventory purchase transactions for the year. Date Transaction Number of Units Unit Cost Total Cost Jan. 1 Beginning inventory 60 $ 82 $ 4,920 May. 5 Purchase 250 85 21,250 Nov. 3 Purchase 200 90 18,000 510 $ 44,170 Calculate ending inventory and cost of goods sold for the year, assuming the company uses weighted-average cost.

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  1. 22 September, 23:25
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    Units of inventory = 40 units

    Value the closing inventory = $ 3,464.31

    Cost of goods sold = $40,705.69

    Explanation:

    To value inventory, The weighted average inventory method uses the value of weighted average price of all the batches purchased till date. The weighted average price is re-computed whenever a new batch of stock is received.

    Weighted average cost = Total value of stock / Total units

    Step 1

    Calculate the weighted average price

    For Wright, we can work out the weighted average price as follows:

    Weighted average cost = Total value of stock / Total units

    The total quantity purchased plus opening inventory before sales is 510 units

    step 1

    Weighted average price

    = $44,170 / 510 units

    = $86.607

    Step 2

    Calculate the closing inventory units

    Closing inventory = opening inventory + purchases - sales

    =510-470

    = 40 units

    Step 3

    Value the closing inventory

    = 40 * $86.60784314

    = $ 3,464.31

    step 4

    Cost of goods sold

    = 470 * $86.60

    = $40,705.69

    Units of inventory = 40 units

    Value the closing inventory = $ 3,464.31

    Cost of goods sold = $40,705.69
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