Questions: Hardware Incorporated uses a periodic inventory system and the weighted average method. The company began the year with 150 large brass switch plates on hand at a cost of 4.00 each. Purchases of switch plates during the year were as follows: Date of Transaction Quantity Received Unit Cost May 7 200 4.20 June 11 200 4.40 November 22 250 4.80 The switch plates sell for 7.00 each. If Hardware sells 570 switch plates during the year, what is the company's cost of goods sold?

Hardware Incorporated uses a periodic inventory system and the weighted average method. The company began the year with 150 large brass switch plates on hand at a cost of 4.00 each. Purchases of switch plates during the year were as follows:
Date of Transaction Quantity Received Unit Cost
May 7 200 4.20
June 11 200 4.40
November 22 250 4.80

The switch plates sell for 7.00 each. If Hardware sells 570 switch plates during the year, what is the company's cost of goods sold?

Transcript text: Hardware Incorporated uses a periodic inventory system and the weighted average method. The company began the year with 150 large brass switch plates on hand at a cost of $\$ 4.00$ each. Purchases of switch plates during the year were as follows: \begin{tabular}{lcc} \hline Date of Transaction & Quantity Received & Unit Cost \\ \hline May 7 & 200 & $\$ 4.20$ \\ June 11 & 200 & $\$ 4.40$ \\ November 22 & 250 & $\$ 4.80$ \end{tabular} The switch plates sell for $\$ 7.00$ each. If Hardware sells 570 switch plates during the year, what is the company's cost of goods sold?

Solution

Solution Steps

To determine the cost of goods sold (COGS) using the weighted average method, we need to follow these steps:

Calculate the total cost and total quantity of switch plates available for sale.
Compute the weighted average cost per unit.
Multiply the weighted average cost per unit by the number of units sold to get the COGS.

Step 1: Calculate Total Quantity and Total Cost

The company begins the year with: \[ \text{Initial Quantity} = 150 \] \[ \text{Initial Cost per Unit} = 4.00 \]

Purchases during the year are:

May 7: $200$ units at $4.20$
June 11: $200$ units at $4.40$
November 22: $250$ units at $4.80$

Calculating the total quantity: \[ \text{Total Quantity} = 150 + 200 + 200 + 250 = 800 \]

Calculating the total cost: \[ \text{Total Cost} = (150 \times 4.00) + (200 \times 4.20) + (200 \times 4.40) + (250 \times 4.80) = 600 + 840 + 880 + 1200 = 3520.00 \]

Step 2: Calculate Weighted Average Cost per Unit

The weighted average cost per unit is calculated as: \[ \text{Weighted Average Cost per Unit} = \frac{\text{Total Cost}}{\text{Total Quantity}} = \frac{3520.00}{800} = 4.40 \]

Step 3: Calculate Cost of Goods Sold (COGS)

The number of units sold is: \[ \text{Units Sold} = 570 \]

The COGS is calculated as: \[ \text{COGS} = \text{Units Sold} \times \text{Weighted Average Cost per Unit} = 570 \times 4.40 = 2508.00 \]