The Xu Corporation uses a periodic inventory system.The company has a beginning inventory of 300 units at $5 each on January 1.Xu purchases 500 units at $4 each in February and 200 units at $6 each in March.There were no additional purchases or sales during the remainder of the year. Xu sells 150 units during the quarter.If Xu uses the weighted average method,what is its cost of goods sold?

Question

Quizplus · Accepted Answer

To calculate cost of goods sold using the weighted average method, we need to find the weighted average cost per unit first.
Weighted average cost per unit = (beginning inventory value + purchases value) / total units
Beginning inventory value = 300 units x $5 per unit = $1500
Purchases value = (500 units x $4 per unit) + (200 units x $6 per unit) = $2600
Total units = beginning inventory + purchases = 300 + 500 + 200 = 1000 units

Weighted average cost per unit = ($1500 + $2600) / 1000 units = $4.10 per unit

Now we can calculate cost of goods sold:
Cost of goods sold = cost per unit x units sold
Cost of goods sold = $4.10 per unit x 150 units = $615

The closest answer choice is B) $705, which is incorrect. The correct answer is therefore B) $615.

The Xu Corporation Uses a Periodic Inventory System