A company has a beginning inventory of $40,000 and purchases during the year of $110,000.The beginning inventory consisted of 3,000 units and 7,000 units were purchased during the year.The company has 4,000 units left at year-end.Under average-cost,what is Cost of Goods Sold?

Question

Quizplus · Accepted Answer

To calculate Cost of Goods Sold (COGS), we need to find the value of ending inventory first.

Ending inventory = (Number of units left * Cost per unit) 
Number of units left = 4,000 
Cost per unit = Total cost / Number of units 
Total cost = Beginning inventory + Purchases 
= $40,000 + $110,000 
= $150,000 
Number of units = Beginning inventory + Purchases 
= 3,000 + 7,000 
= 10,000 
Cost per unit = Total cost / Number of units 
= $150,000 / 10,000 
= $15

Ending inventory = (4,000 * $15) 
= $60,000

Now, we can calculate COGS:

COGS = Beginning inventory + Purchases - Ending inventory 
= $40,000 + $110,000 - $60,000 
= $90,000

Therefore, the answer is B ($90,000).

A Company Has a Beginning Inventory of $40,000 and Purchases