Chapter 6, Problem 6.4.3P

Inventory by three cost flow methods

Details regarding the inventory of appliances on January 1, 20Y7, purchases invoices during the year, and the inventory count on December 31. 2O’7. of Amsterdam Appliances are summarized as follows:

Instructions
Determine the cost of the inventory on December 31, 20Y7, h the average cost method, using the columnar headings indicated in (1).

To determine

Concept Introduction:

Periodic Inventory System:

The periodic inventory system records and updates the inventory at the end of a particular period. The inventory balance is not updated after each transaction and it is updated periodically.

Average method:

Under this method, the cost per unit of the inventory is calculated as weighted average cost per unit and the cost of goods sold and inventory is calculated with the help of weighted average cost per unit.

The Cost of the ending inventory for each Model using Average Cost method

Answer to Problem 6.4.3P

The Cost of the ending inventory for each Model using Average Cost method is as follows:

Model	Quantity	Unit Cost	Total Cost
A10	4	$ 64	$ 256
	2	$ 70	$ 140
			$ 396
B15	8	$ 176	$ 1,408
E60	3	$ 75	$ 225
	2	$ 65	$ 130
			$ 355
G83	7	$ 242	$ 1,694
	2	$ 250	$ 500
			$ 2,194
J34	12	$ 240	$ 2,880
	3	$ 246	$ 738
			$ 3,618
M90	20	$ 108	$ 2,160
	2	$ 110	$ 220
	1	$ 128	$ 128
			$ 2,508
Q70	5	$ 160	$ 800
	3	$ 170	$ 510
			$ 1,310

Explanation of Solution

The Cost of the ending inventory for each Model using Average Cost method is calculated as follows:

Model	Quantity	Unit Cost	Total Cost
A10	4	$ 64	$ 256
	2	$ 70	$ 140
			$ 396
B15	8	$ 176	$ 1,408
E60	3	$ 75	$ 225
	2	$ 65	$ 130
			$ 355
G83	7	$ 242	$ 1,694
	2	$ 250	$ 500
			$ 2,194
J34	12	$ 240	$ 2,880
	3	$ 246	$ 738
			$ 3,618
M90	20	$ 108	$ 2,160
	2	$ 110	$ 220
	1	$ 128	$ 128
			$ 2,508
Q70	5	$ 160	$ 800
	3	$ 170	$ 510
			$ 1,310