The following information is available for Clancy Company: $$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}$ 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.

Question

The following information is available for Clancy Company:

$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}

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.

Talal Mahmood · Accepted Answer

Final Answer :   Average cost/unit  = $ 5.70 ( $ 11 , 400 ÷ 2 , 000 ) 600 × $ 4 = $ 2 , 400 900 × $ 6 = 5 , 400 50000 ‾ × $ 7.20 = 3.600 ‾ 2 , 000 ‾ ‾ $ 11 , 400 ‾ ‾ \begin{array} { l } 	ext { Average cost/unit } = \$ 5.70 ( \$ 11,400 \div 2,000 ) \\600 	imes \$ 4 = \$ 2,400 \900 	imes \$ 6 = \quad 5,400 \\underline { 50000  } 	imes \$ 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 , 400 900 × $6 = 5 , 400 50000 ​ × $7.20 = 3.600 ​ 2 , 000 ​ ​ $11 , 400 ​ ​ ​   (a) Cost of ending inventory = $4332 (760 × $5.70)(b) Cost of goods sold = $7068 (1240 × $5.700) or $11400 - $4332

Definitions

Learning Objectives

Learning Objectives

Related questions