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Hi,sir.
I have a question want to ask .For the inventory right,
The question is inventory movements for product X during the last quarter were as follows:
January. Purchases 10 items at $19.80 each
February. Sales 10 items at $30 each
March. Purchases 20 items at $24.50 each
Sales 5 items at $30 eachOpening inventory at 1 January was 6 items valued at $15 each
Gross profit for the quarter ,using the weighted average cost method,would be:
Answer:155
How to do this kind of question.
Kindly reply,
Thank you.
First you need to watch our free lecture on Inventories – in there I explain with an example how to calculate the value of the closing inventory using the average method.
Once you have calculated the value of the closing inventory then there should be no problem.
You can calculate the total sales ((10 x $30) + (5 x $30))
You can calculate the total purchases ((10 x $19.80) + (20 x $24.50))
You know the opening inventory (6 x $15); and you will have calculated the closing inventory.So the cost of sales will be opening inventory + purchases – closing inventory.
And the gross profit will be sales – cost of sales.
Hope that helps 🙂
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