Shandy Shutters has the following inventory information. A physical count of merchandise inventory on November 30 reveals that there are 100 units on hand. Assume a periodic inventory system is used. Cost of goods sold under the average-cost method is
A) €1,292.
B) €1,284.
C) €1,268.
D) €1,200.

Question

Shandy Shutters has the following inventory information.  A physical count of merchandise inventory on November 30 reveals that there are 100 units on hand. Assume a periodic inventory system is used. Cost of goods sold under the average-cost method is
A) €1,292. 
B) €1,284. 
C) €1,268. 
D) €1,200.

Quizplus · Accepted Answer

To calculate cost of goods sold using the average-cost method, we first need to calculate the average cost per unit.

Total cost of inventory = (40 units x €8) + (60 units x €10) = €800 + €600 = €1,400

Average cost per unit = Total cost of inventory / Total units in inventory = €1,400 / 100 units = €14 per unit

Cost of goods sold = Beginning inventory + Purchases - Ending inventory
Beginning inventory = (40 units x €8) + (20 units x €10) = €320 + €200 = €520
Purchases = (40 units x €10) + (30 units x €12) = €400 + €360 = €760
Ending inventory = 10 units x €14 = €140

Cost of goods sold = €520 + €760 - €140 = €1,140

Therefore, the correct answer is B) €1,284.

Shandy Shutters Has the Following Inventory Information