Sawyer Company uses the perpetual inventory system and the moving-average method to value inventories. On August 1, there were 10,000 units valued at $30,000 in the beginning inventory. On August 10, 20,000 units were purchased for $6 per unit. On August 15, 24,000 units were sold for $12 per unit. The amount charged to cost of goods sold on August 15 was

Question

Quizplus · Accepted Answer

To calculate the cost of goods sold (COGS) using the moving-average method, we need to first calculate the weighted average cost per unit.

Weighted average cost per unit = Total cost of units available for sale ÷ Total number of units available for sale

Total cost of units available for sale = Beginning inventory cost + Purchases cost

Total number of units available for sale = Beginning inventory units + Purchases units

Beginning inventory cost = $30,000 
Purchases cost = 20,000 units x $6 per unit = $120,000

Total cost of units available for sale = $30,000 + $120,000 = $150,000 
Beginning inventory units = 10,000 units 
Purchases units = 20,000 units

Total number of units available for sale = 10,000 units + 20,000 units = 30,000 units

Weighted average cost per unit = $150,000 ÷ 30,000 units = $5 per unit

Now we can calculate the COGS for the 24,000 units sold on August 15:

COGS = Number of units sold x Weighted average cost per unit

Number of units sold = 24,000 units

COGS = 24,000 units x $5 per unit = $120,000

Therefore, the amount charged to COGS on August 15 was $120,000. The answer is option C.

Sawyer Company Uses the Perpetual Inventory System and the Moving-Average