Units Unit Price Beginning Inventory 709 $2.00 Purchases 556 $6.00 Sales 959 $13.00 SGA Expenses $2,649 per annum What is the cost of goods sold using the weighted average method? A) $3,423.82. B) $2,918.00. C) $3,604.02. Can someone please explain how to solve this question. Thank you
c. It’s simple. 709+556 - beginning inventory + purchases. then divide each by that total to get your weights. so it works out as 56% from beginning inventory, 44% from purchases. multiply those percentages by you purchase prices and add gets you W/A of 3.76. times that by units sold, and there you go.
(709 * $2) + (556 * $6) = $4,754.00 $4,754 / (709+556) = $3.758102 per unit $3.758102 * 959 = $3,604.02
You don’t include SG&A in COGS because SG&A is expensed in the period incurred instead of capitalizing with other invesntory costs like conversion cost or allocation of fixed production overhead based on normal capacity levels. Just a reminder…
Conquistador07 Wrote: ------------------------------------------------------- > You don’t include SG&A in COGS because SG&A is > expensed in the period incurred instead of > capitalizing with other invesntory costs like > conversion cost or allocation of fixed production > overhead based on normal capacity levels. > > Just a reminder… You do not include SG&A in cogs because SG&A expenses are seperate from COGS. Rev - COGS = Gross Profit.
What happens in the next period then? Do we use FIFO and say that the starting inventory for the next period is:
709+556=1265
1265-959=306@$6?
In other words how do we track which of the inventory got sold and which remains? Seems like a mish mash between specific identification, FIFO and a 3rd method.
Beginning inventory next period is ending inventory this period:
$3.758102 × 306 = $1,150.