Koontz Company uses the perpetual inventory method. On January 1, 2016, the comp

Question

Koontz Company uses the perpetual inventory method. On January 1, 2016, the company's first day of operations, Koontz purchased 1,150 units of inventory that cost $5.5 each. On January 10, 2016, the company purchased an additional 1,400 units of inventory that cost $7.5 each. If Koontz uses a weighted average cost flow method and sells 1,300 units of inventory, the amount of inventory appearing on balance sheet following the sale will be approximately (Round your intermediate calculations to one decimal places.):

A $8,580.

B $6,875.

C $8,250.

D $9,750.

Explanation / Answer

Weighted average price of inventory purchased

= (1,150*$5.5+1,400*$7.5)/(1,150+1,400)

= $16,825/2,550

= $6.6

Inventory remaining at balance sheet date is

= (Total inventory - Inventory sold out)* Weighted average price

= ([1,150+1,400]-1,300)*6.6

= (2,550-1,300) *$6.6

=1,250*$6.6

=$8,250

So, Answer is Option C

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