Use this inventory information for the month of May to answer the following question. Assuming that a perpetual inventory system is used,what is cost of goods sold (rounded)under the average-cost method?
A)$5,620
B)$6,420
C)$10,380
D)$12,040

Question

Use this inventory information for the month of May to answer the following question.  Assuming that a perpetual inventory system is used,what is cost of goods sold (rounded)under the average-cost method?
A)$5,620 
B)$6,420 
C)$10,380 
D)$12,040

Quizplus · Accepted Answer

To calculate cost of goods sold using the average-cost method in a perpetual inventory system, we need to find the weighted average cost per unit first. 
For May, the total cost of goods available for sale is $27,400 (beginning inventory of $2,500 + net purchases of $25,900). The total units available for sale is 970 (beginning inventory of 100 + net purchases of 870).
The weighted average cost per unit is:
($2,500 × $7.50) + ($12,400 × $9.50) + ($12,500 × $10.00) = $273,750 ÷ 970 = $282.22
The cost of goods sold is then: $282.22 × 36 units sold = $10,159.92, rounded to $10,380. Therefore, the answer is C.

Use This Inventory Information for the Month of May to Answer