Santa Fe Tile Company had the following inventory purchases and sales during the month of May. The company uses the periodic inventory method. If Santa Fe uses average-cost, how much was the Cost of goods sold for the month?

Question

Santa Fe Tile Company had the following inventory purchases and sales during the month of May. The company uses the periodic inventory method.  If Santa Fe uses average-cost, how much was the Cost of goods sold for the month?

Quizplus · Accepted Answer

To calculate the cost of goods sold using the average-cost method, we need to determine the average cost per unit first. We can do this by dividing the total cost of inventory available for sale by the total number of units available for sale:

Total cost of inventory available for sale = $1,300 + $1,500 + $1,600 = $4,400

Total units available for sale = 200 + 250 + 300 = 750

Average cost per unit = $4,400 / 750 = $5.87

Next, we need to calculate the number of units sold during the month of May by subtracting the ending inventory from the total units available for sale:

Total units available for sale = 750
Ending inventory = 150
Units sold = 750 - 150 = 600

Finally, we can calculate the cost of goods sold by multiplying the number of units sold by the average cost per unit:

Cost of goods sold = 600 x $5.87 = $3,522

Therefore, the answer is D) $1,615.

Santa Fe Tile Company Had the Following Inventory Purchases and Sales