hown below is the activity for one of the products of Random Creations:
January 1 balance, 96 units @ $50 $4,800
Purchases:
January 18: 66 units @ $60
January 28: 66 units @ $61
Sales:
January 12: 46 units
January 22: 46 units
January 31: 61 units
Required:
Compute the January 31 ending inventory and cost of goods sold for January, assuming Random Creations uses average cost and a periodic inventory system.
Note: Round intermediate calculations to two decimal numbers. Round your final answers to nearest whole dollar amount.
To calculate the January 31 ending inventory and cost of goods sold, we need to calculate the average cost per unit and then use it to determine the cost of goods sold.
1. Calculate the total units purchased in January:
January 18 purchase: 66 units
January 28 purchase: 66 units
Total units purchased = 66 + 66 = 132 units
2. Calculate the average cost per unit:
Total cost of units purchased = (66 units * $60 per unit) + (66 units * $61 per unit) = $3960 + $4026 = $7,986
Average cost per unit = Total cost of units purchased / Total units purchased = $7,986 / 132 units = $60.50 per unit
3. Calculate the cost of goods sold:
January 12 sales: 46 units * $60.50 per unit = $2,783
January 22 sales: 46 units * $60.50 per unit = $2,783
January 31 sales: 61 units * $60.50 per unit = $3,690
Total cost of goods sold = $2,783 + $2,783 + $3,690 = $9,256
4. Calculate the ending inventory:
January 1 beginning inventory = 96 units * $50 per unit = $4,800
Add purchases in January: 132 units * $60.50 per unit = $7,986
Total inventory available = $4,800 + $7,986 = $12,786
Ending inventory = Total inventory available - Cost of goods sold = $12,786 - $9,256 = $3,530
Therefore, the January 31 ending inventory is $3,530 and the cost of goods sold for January is $9,256.