Ask Experts Questions for FREE Help !
Ask
    jaefer's Avatar
    jaefer Posts: 5, Reputation: 1
    New Member
    		  
    #1

    Nov 2, 2009, 10:10 PM
    Perpetual Average Cost
    Hi I was wondering if anyone could help me on my acct hw. I have to figure out the average cost using the perpetual inventory system. This is the info given to me:

    These following transactions are all purchases:

    5/1: Units Purchased:7; Unit Cost: $151
    5/4: Sales Unit: 4
    5/8: Units Purchased:8; Unit Cost: $166
    5/12: Sales Unit: 5
    5/15: Units Purchased:6; Unit Cost: $184
    5/20: Sales Unit: 3
    5/25: Sales Unit: 4

    I calculated LIFO=2,704 and FIFO=2,569 and Total Cost=3,489

    can someone show me the steps to solving the average cost? I tried following examples but I always get lost.

    thank you to anyone who can help me!
    rehmanvohra's Avatar
    rehmanvohra Posts: 739, Reputation: 27
    Senior Member
    		  
    #2

    Nov 3, 2009, 10:33 AM

    We can not solve the problem for you, but here is a guidance.

    You calculate average cost at the time of every new purchase by adding together the cost of inventory in hand with the cost of new purchases, whih is then divided by the total inventory units available.
    jaefer's Avatar
    jaefer Posts: 5, Reputation: 1
    New Member
    		  
    #3

    Nov 3, 2009, 11:18 PM

    After looking at some examples, this is what I came up with, can you tell me if I did it correctly?

    5/4 [4 x 151] = 604
    5/2 [3 x 151] + [8 x 166] = 1781;
    1781/11=161.91; 161.91 x 5 = 809.55
    5/20 [6 x 166] + [6 x 184] =2100;
    2100/12 = 175; 175 x 3 = 525
    5/25 [2 x 166] + [6 x 184] = 1436;
    1436/8 = 179.5; 179.5 x 8 = 1436

    Total: [604+809.55+525+1436] = 3374.55

    Total Cost = 3489

    Ending Inventory [Average Cost] = 3489-3374.55 = 114.45

    Is this correct?
    rehmanvohra's Avatar
    rehmanvohra Posts: 739, Reputation: 27
    Senior Member
    		  
    #4

    Nov 3, 2009, 11:47 PM
    Quote Originally Posted by jaefer View Post
    After looking at some examples, this is what I came up with, can you tell me if I did it correctly?

    5/4 [4 x 151] = 604
    5/2 [3 x 151] + [8 x 166] = 1781;
    1781/11=161.91; 161.91 x 5 = 809.55
    5/20 [6 x 166] + [6 x 184] =2100;
    2100/12 = 175; 175 x 3 = 525
    5/25 [2 x 166] + [6 x 184] = 1436;
    1436/8 = 179.5; 179.5 x 8 = 1436

    Total: [604+809.55+525+1436] = 3374.55

    Total Cost = 3489

    Ending Inventory [Average Cost] = 3489-3374.55 = 114.45

    Is this correct?
    No the answer is not correct:
    On 5/20 you had a balance of 6 units @ 161.91 and not @166. The average cost of 161.91 will remain till end since there are no purchases after that date. The ending inventory will be value @161.91
    jaefer's Avatar
    jaefer Posts: 5, Reputation: 1
    New Member
    		  
    #5

    Nov 4, 2009, 12:50 PM
    Wait, why do I have to continue using 161.91? Is that part of using this method? How come I didn't reuse any average number? Thank you for correcting too!
    jaefer's Avatar
    jaefer Posts: 5, Reputation: 1
    New Member
    		  
    #6

    Nov 4, 2009, 12:51 PM

    I just tried inputting the answer and it said it was wrong?
    jaefer's Avatar
    jaefer Posts: 5, Reputation: 1
    New Member
    		  
    #7

    Nov 4, 2009, 01:16 PM

    Sorry for all the replies, but is this correct for the entries of 5/20 and 5/25?

    5/20 [6 x 161.91] + [6 x 184] = 2075.46
    2075.46/172.96; 172.96 x 3 = 518.88

    5/25 [2 x 161.91] + [6 x 184] = 1427.82
    1427.82/8 = 178.48; 178.48 x 8 = 1427.82

    Making the total = 3360.25
    Ending inventory = 3489-3360.25 = 128.75

    is that correct?
Not your question? Ask your question View similar questions
 

Question Tools Search this Question
Search this Question:

Advanced Search

Add your answer here.


Check out some similar questions!

Perpetual LIFO, FIFO, and average cost [ 2 Answers ]

Hi I need some help with this question, my book says that companies hardly use perpetual LIFO, FIFO, and average cost to their inventory and it didn't bother explaining it to us. Then at the end it asks a question about how to do. I don't know where to begin on it, any help would be greatly...

Average cost, fifo cost, lifo cost [ 1 Answers ]

In may they began with 67 tents @ $17 and purchases of: 104 tents @ $19 159 tents @ $21 36 tents @ $22 They sold 314 tents and may 31st ending inventory consists of 52 tents. The sales price of each tent was $49. Determine the cost of goods sold and ending inventory for the month of may...

Perpetual FIFO LIFO Average-Cost Method [ 0 Answers ]

I just can not figure out how to perform FIFO LIFO and average cost method under the Perpetual inventory system.

Cost of end. Inv. And cost of goods sold under average cost [ 1 Answers ]

It's me again! I have another question to the same problem. In case someone else responds, I'll post the problem again. June 1 inv20051000 June 12 purch.30061800 June 23 purch. 50073500 June 30 inv. I need to compute the cost of the ending inventory and the cost of goods sold using the...

Perpetual LIFO, FIFO, moving average cost [ 2 Answers ]

:confused: I have an exam in my acct class, ugh... so lost!! I thought I had this all clear but I have done this problem multiple times and can't end up with our designated answer, can someone help? Any help on any part of the problem would help me out a lot, very lost :( Smith is a retailer in...

View more questions Search