   Chapter 7, Problem 7.3BPR

Chapter
Section
Textbook Problem

Weighted average cost method with perpetual inventoryThe beginning inventory for Dunne Co. and data on purchases and sales for a three-month period are shown in Problem 7-1B.Instructions 1. Record the inventory, purchases, and cost of merchandise sold data in a perpetual inventory record similar to the one illustrated in Exhibit 5, using the weighted average cost method. 2. Determine the total sales, the total cost of merchandise sold, and the gross profit from sales for the period. 3. Determine the ending inventory cost on June 30.

(1)

To determine

Perpetual Inventory System:

Perpetual Inventory System refers to the inventory system that maintains the detailed records of every inventory transactions related to purchases, and sales on a continuous basis. It shows the exact on-hand-inventory at any point of time.

Weighted-average cost method:

Under weighted average cost method, the company calculates a new average cost after every purchase is made. It is determined by dividing the cost of goods available for sale by the units on hand.

To record: inventory, purchase and cost of merchandise sold data in perpetual inventory record.

Explanation

Figure (1)

Working notes:

Calculate the weighted average unit cost as follows: (Apr 08)

 Weighted average method Quantity Unit cost Total cost of inventory in hand 25 units $1,200$30,000 75 units $1,240$93,000 100 units $123,000 Table (1) Weighted average unit cost = Total cost of inventory in handTotal quantity=$123,000100=$1,230 (1) Calculate the weighted average unit cost as follows: (May 08)  Weighted average method Quantity Unit cost Total cost of inventory in hand 30 units$1,230 $36,900 60 units$1,260 $75,600 90 units$112,500

Table (2)

Weighted average unit cost = Total cost of inventory in handTotal quantity=\$112,50090

(2)

To determine

To calculate: the sales and cost of merchandise sold accounts and gross profit.

(3)

To determine

To calculate: Ending inventory cost for the period.

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