Vaughn Manufacturing just began business and made the following four inventory purchases in June: June 1 159 units $954 June 10 212 units 1484 June 15 212 units 1696 June 28 159 units 1431 $5565 A physical count of merchandise inventory on June 30 reveals that there are 212 units on hand. Using the average cost method, the amount allocated to the ending inventory on June 30 is

Vaughn Manufacturing

The amount allocated to the ending inventory on June 30 is:

$1,590

Explanation:

a) Data and Calculations:

Inventory purchases:

Date       Units          Cost

June 1      159 units  $954

June 10   212 units    1484

June 15   212 units    1696

June 28  159 units     1431

Total       742          $5565

Average cost = $5,565/742 = $7.50

Ending Inventory = 212 * $7.50 = $1,590

Cost of goods sold = Cost of goods available for sale minus the Ending inventory

= $5,565 - $1,590

= $3,975

Alternatively, this can be calculated as follows:

Units of goods sold multiplied by the average cost

= (742 -212) * $7.50

= $3,975

The cost of goods available for sale is made up of the Beginning inventory (if any) plus purchases during the current period.  When the ending inventory is subtracted from the cost of goods available for sale, the resulting figure is the cost of goods sold.