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calabrase9
Jul 10, 2008, 11:27 AM
I have a weight average problem that A company reports the following beginning inventory and purchases for the month of January. On January 26, 355 units were sold. What is the cost of the 160 units that remain in ending inventory at January 31, assuming costs are assigned based on a perpetual inventory system and use of (a) FIFO, (b) LIFO, and (c) weighted average? (Round unit costs to the nearest cent. Round total cost of Inventory to the nearest dollar. Omit the "$" sign in your response.)




Units
Unit Cost

Beginning inventory on January 1
320
$ 3.00

Purchase on January 9
85
3.20

Purchase on January 25
110
3.30


--------------------------------------------------------------------------------

FIFO
$
523. (33%)


LIFO
$
480. (33%)


Weighted average
$
(0%)

morgaine300
Jul 12, 2008, 09:08 PM
Weighted average always works the same way, regardless of the subject matter. It's actually a short-cut way to doing a regular old average. If you had one thing at $15 and one thing at $18, you could add $15 + $18 and divide by 2. But in this case you cannot just average $3, $3.20, and $3.30, because you don't just have one of each. You have a LOT of each. And you have to count every single one of them. (Do you want to list $3.00 320 times to include in your average? Probably not.)

So instead, you multiply the value times how many you have, to get a total value. Add up all those total values and divide by how many you have.

For instance:

100 @ $10 = $1000
120 @ $11 = $1320

So you have total dollar value of $2320 and total units of 220. So $2320/220 = $10.55 average. i.e. you've averaged all 220 of the units, not just $10 & $11. (For something like this, you may not want to round you answer to cents, but take it out 3 or 4 decimal places.)

It's actually the same way you do a grade point average, except instead of a dollar value, you have a point value for the grade. (Assuming a 4-point scale.)

P.S. This really oughta be over under the acct/finance homework help section.