From the following details calculate cost of stock and cost of sales f...
Calculation of Cost of Stock and Cost of Sales for the month of January 2008 using the Weighted Average Method:
Step 1: Calculation of Weighted Average Cost per Unit
To calculate the weighted average cost per unit, we need to consider the opening stock and the purchases made during the month.
Opening Stock:
- Number of units: 500
- Rate per unit: $8
- Total value: 500 units x $8 = $4,000
Purchases:
1. Jan 5:
- Number of units: 800
- Rate per unit: $9
- Total value: 800 units x $9 = $7,200
2. Jan 14:
- Number of units: 700
- Rate per unit: $9
- Total value: 700 units x $9 = $6,300
3. Jan 21:
- Number of units: 1,000
- Rate per unit: $10
- Total value: 1,000 units x $10 = $10,000
4. Jan 23:
- Number of units: 500
- Rate per unit: $9
- Total value: 500 units x $9 = $4,500
Total Units: 500 (opening stock) + 800 + 700 + 1,000 + 500 = 3,500 units
Total Value: $4,000 (opening stock) + $7,200 + $6,300 + $10,000 + $4,500 = $32,000
Weighted Average Cost per Unit: $32,000 / 3,500 units = $9.14 (rounded to two decimal places)
Step 2: Calculation of Cost of Stock
To calculate the cost of stock, we need to multiply the weighted average cost per unit by the number of units in the closing stock.
Closing Stock:
- Number of units: 100
Cost of Stock: 100 units x $9.14 = $914
Step 3: Calculation of Cost of Sales
To calculate the cost of sales, we need to determine the number of units sold and multiply it by the weighted average cost per unit.
Number of units sold:
- Jan 10: 500 units
- Jan 18: 400 units
- Jan 28: 1,000 units
Cost of Sales: (500 units x $9.14) + (400 units x $9.14) + (1,000 units x $9.14) = $4,570 + $3,656 + $9,140 = $17,366
Therefore, the cost of stock for the month of January 2008 is $914 and the cost of sales is $17,366.
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