Kendall Company uses the perpetual inventory method. On January 1, 2014, Kendall purchased 300 units of inventory that cost $1.00 each. On January 10, 2014, the company purchased an additional 400 units of inventory that cost $1.50 each. If Kendall uses the weighted average cost flow method and sells 400 units of inventory, the amount of cost of goods sold appearing on the income statement will be:
A) $450.
B) $529.
C) $514.
D) $600.

Question

Quizplus · Accepted Answer

To calculate the weighted average cost per unit, we first need to calculate the total cost of inventory:

Total cost = (300 units x $1.00 per unit) + (400 units x $1.50 per unit)
Total cost = $300 + $600
Total cost = $900

We then divide the total cost by the total number of units:

Weighted average cost per unit = $900 ÷ (300 units + 400 units)
Weighted average cost per unit = $1.125 per unit

To calculate the cost of goods sold, we multiply the number of units sold (400) by the weighted average cost per unit ($1.125):

Cost of goods sold = 400 units x $1.125 per unit
Cost of goods sold = $450

Therefore, the answer is C) $514.

Kendall Company Uses the Perpetual Inventory Method