Num. of units

Unit cost

Sales price

Shipping cost (per unit)

FOB

Beginning Inventory, Jan. 1

100

10

0

Sold, Jan. 10

80

16

1

shipping point

Purchased, Jan. 16

60

15

1

shipping point

Sold, Jan. 18

50

20

1

destination

Purchased, Jan. 20

70

18

1

destination

Ending Inventory, Jan. 31

100

Under perpetual inventory system and weighted average cost method, what is the COGS in Jan.?

Question

Num. of units

Unit cost

Sales price

Shipping cost (per unit)

FOB

Beginning Inventory, Jan. 1

100

10

0

Sold, Jan. 10

80

16

1

shipping point

Purchased, Jan. 16

60

15

1

shipping point

Sold, Jan. 18

50

20

1

destination

Purchased, Jan. 20

70

18

1

destination

Ending Inventory, Jan. 31

100

Under perpetual inventory system and weighted average cost method, what is the COGS in Jan.?

BlackTom AI · Accepted Answer

Question restatement: Under a perpetual inventory system and weighted average cost method, determine the COGS for January given the following data: beginning inventory 100 units at cost 10 with 0 shipping per unit, Sales on Jan 10 of 80 units with unit cost 10 and shipping 1; Purchase Jan 16 of 60 units at 15 with shipping 1; Sale Jan 18 of 50 units with unit cost 20 and shipping 1; Purchase Jan 20 of 70 units at 18 with shipping 1; Ending inventory Jan 31 of 100 units.

Option A: 1820
- This would imply a COGS value different from the computed weighted averages. Under perpetual weighted average, COGS fluctuates with each purchase and sale, so 1820 does not align with the cumulative available-for-sale cost minus ending inventory as calculated below.

Option B: 1525
- This matches the correct COGS when applying perpetual weighted-average cost. Here is the step-by-step calculation that leads to 1525: 
  - Start with beginning inventory: 100 units × 10 = 1000 total cost.
  - First sale (80 units) before any new purchase; cost per unit = 10; COGS = 80 × 10 = 800; ending inventory is 20 units at cost 10 each (total 200).
  - Purchase on Jan 16: 60 units at 15 plus shipping 1 per unit, so cost per unit = 16; total cost = 60 × 16 = 960; new total cost = 200 (invt) + 960 = 1160; new quantity = 20 + 60 = 80.
  - Second sale (50 units): weighted average cost per unit = 1160 / 80 = 14.5; COGS = 50 × 14.5 = 725; ending inventory = 30 units at 14.5 each (total 435).
  - Purchase on Jan 20: 70 units at 18 plus shipping 1 per unit, cost per unit = 19; total cost = 70 × 19 = 1330; new total cost = 435 + 1330 = 1765; new quantity = 30 + 70 = 100.
  - Ending inventory (Jan 31): 100 units at weighted average cost 1765 / 100 = 17.65; total ending inventory value = 1765.
  - COGS = total cost of goods available for sale (_beginning 1000 + purchases 960 + 1330 = 3290) minus ending inventory cost (1765) = 1525.

Option C: None of the other three
- This would be chosen only if none of the provided numbers (1820, 1525, 1487.5) match the computed result. Since 1525 accurately reflects the perpetual weighted-average calculation, this option is not correct.

Option D: 1487.5
- This figure does not align with the stepwise weighted-average computations shown above. It would require a different sequence or cost flow assumption, which isn’t consistent with the given data and method.

In summary, understanding each transaction's effect on the weighted average and the COGS under perpetual inventory is essential. The calculations above demonstrate how to apply the method at each sale and purchase date to arrive at the period COGS.

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