Kendall Company uses the perpetual inventory method.On January 1,2012,Kendall purchased 300 units of inventory that cost $1.00 each.On January 10,2012,the company purchased an additional 400 units of inventory that cost $1.50 each.If Kendall uses the weighted average cost flow method and sells 400 units of inventory,the amount of cost of goods sold appearing on the income statement will be:
A) $450.
B) $529.
C) $514.
D) $600.

Question

Quizplus · Accepted Answer

Under weighted average cost flow method, cost of goods available for sale is divided by the total number of units available for sale to arrive at the weighted average cost per unit.

Cost of goods available for sale = (300 units × $1.00) + (400 units × $1.50) = $300 + $600 = $900

Total units available for sale = 300 units + 400 units = 700 units

Weighted average cost per unit = $900 ÷ 700 units = $1.29

When 400 units are sold, the cost of goods sold can be calculated as:

Cost of goods sold =  400 units × $1.29 per unit = $514

Therefore, the correct answer is C) $514.

Kendall Company Uses the Perpetual Inventory Method