Hi,
Can you please help me answer this question using the average costing methodology?
A hospital was out of juice at the end of September. They bought 200 cases on Oct. 1 at $10.00 each. and 200 more cases on Nov. 1 for $12.00 each. There were 100 cases left at the end of Oct. What would be first case expensed on Nov. 2 using the average costing method?
Certainly! To answer this question using the average costing methodology, we need to calculate the average cost of each case of juice based on the purchases made in October and November.
Here's how you can calculate the average cost:
1. Start by adding up the total cost of the purchases made in October and November.
- October purchase: 200 cases at $10.00 each, so the total cost is 200 * $10.00 = $2000.00
- November purchase: 200 cases at $12.00 each, so the total cost is 200 * $12.00 = $2400.00
2. Next, calculate the total number of cases purchased in October and November.
- October purchase: 200 cases
- November purchase: 200 cases
3. Calculate the average cost per case by dividing the total cost by the total number of cases purchased.
- Average cost = (Total cost of purchases) / (Total number of cases)
- Average cost = ($2000.00 + $2400.00) / (200 + 200) = $4400.00 / 400 = $11.00
Now that we have calculated the average cost per case, we can determine the first case expensed on November 2nd.
Since there were 100 cases left at the end of October, the first case expensed on November 2nd would be considered part of the remaining inventory from October. Therefore, the cost to expense would be based on the average cost per case, which we calculated as $11.00.
Hence, the first case expensed on November 2nd using the average costing method would be $11.00.
I hope this helps! Let me know if you have any further questions.