Morton uses the moving average flow assumption. On January 1, there were 180 units on hand and the total inventory cost was $900. On January 10, 40 more units were purchased at a cost of $6 per unit. Sales included 20 units on January 3 and 60 units on January 17. What was the total cost of goods sold recorded for the units sold on January 17?
A) $728
B) $330
C) $100
D) $312

Question

Quizplus · Accepted Answer

The moving average cost per unit after the purchase on January 10 is calculated as follows: Initial inventory cost is $900 for 180 units, which gives a cost per unit of $5. After purchasing 40 more units at $6 each, the total cost is $240. The new total inventory cost is $900 + $240 = $1140, and the total units are 180 + 40 = 220. The new average cost per unit is $1140 / 220 = $5.18. By January 17, 20 units have already been sold, leaving 200 units before the sale on January 17. The cost of goods sold for the 60 units on January 17 is 60 units * $5.18 = $310.80, which rounds to $312.

Morton Uses the Moving Average Flow Assumption