Question

Jameson Company uses average cost and a perpetual system. On January 1, the company had 600 units of inventory at an average cost of $55 per unit for a total cost of $33,000. The company purchased and sold inventory during the month as follows: Purchases: January 10: 1,000 units at $59 = $59,000 January 20: 800 units at $62 = $49,600 Sales: January 12: 1,200 units January 28: 900 units What is the average cost per unit that should be used to determine the cost of the units sold on January 28?

Answer 1

Answer: AVERAGE COST = $60.50

Explanation:

January 1:

Inventory unit = 600

Cost per unit = $55

Total cost = $33,000

January 10:

Purchased inventory unit = 1000

Cost per unit = $59

Total = $59,000

January 12:

Unit sold = 1200

January 20:

Purchased inventory unit = 800

Cost per unit = $62

Total = $49,600

Average cost of inventory prior to January 12 sales :

[Cost(January 1) + Cost(January 10)] ÷ unit (January 1) + unit(January 10)

= $(33,000 + 59,000) ÷ (600 +1000)

= $92,000 ÷ 1600 = $57.50

Sales made on January 12: 1200 units

Total units left in inventory :

1600 - 1200 = 400 units

Average cost of inventory after January 20 inventory purchase:

(Unit × cost per unit) ÷ total unit

Average cost =[ (400 × $57.50) + (800 × $62)] ÷ (400 + 800)

Average cost = ($23,000 + $49,600) ÷ 1200

Average cost = $(72,600 ÷ 1200) =

$60.50

Answer 2

Answer:

the average cost per unit that should be used to determine the cost of the units sold on January 28 is $ 59.00

Explanation:

The Weighted Average Cost Method calculates the new cost of Inventory with each purchase of Inventory.

The Perpetual Inventory System records the cost of inventory sold with each sale made.

Calculation of  the new cost of Inventory with each purchase of Inventory :

January 10:

Cost per Unit = Total Cost / Total Number of Units

Cost per Unit = (( 600 units × $55 per unit ) + ( 1000 units × $59 per unit )) / 1600 units

                      = $ 57.50

January 20:

Cost per Unit = Total Cost / Total Number of Units

Cost per Unit = (( 1600 units × $57.50 per unit ) + ( 800 units × $62 per unit )) / 2400 units

                      = $ 59.00

There were no further purchases from this point

Thus cost per units remains at $ 59.00

Therefore the average cost per unit that should be used to determine the cost of the units sold on January 28 is $ 59.00