Weighted Average Cost Flow Method Under Perpetual Inventory System The following

Question

Weighted Average Cost Flow Method Under Perpetual Inventory System

The following units of a particular item were available for sale during the calendar year:

The firm uses the weighted average cost method with a perpetual inventory system. Determine the cost of merchandise sold for each sale and the inventory balance after each sale. Present the data in the form illustrated in Exhibit 6. Round unit cost to two decimal places, if necessary

Jan. 1 Inventory 10,000 units at $75.00 Mar. 18 Sale 8,000 units May 2 Purchase 18,000 units at $77.50 Aug. 9 Sale 15,000 units Oct. 20 Purchase 7,000 units at $80.25

Explanation / Answer

In perpetual inventory system, we have to calculate the weighted average cost per unit before each sale transaction.

Weighted Average = Total Cost of InventoryUnit CostTotal Units in Inventory

Working of amount are in $

Schedule of Cost of Merchandise Sold Weighted Average Cost Flow Method Purchases Cost of Merchandise Sold Inventory Date Quantity Unit Cost Total Cost Quantity Unit Cost Total Cost Quantity Unit Cost Total Cost Jan. 1 10000 75 750000 Mar. 18 8000 75 600000 2000 75 150000 May-02 18000 77.5 1395000 20000 77.25 1545000 Aug. 9 15000 77.25 1158750 5000 77.25 386250 Oct. 20 7000 80.25 561750 12000 79.0 948000 Dec. 31 Balances $ 12000 79.0 948000

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