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Dunbar Distribution markets CDs of numerous performing artists
Dunbar Distribution markets CDs of numerous performing artists. At the beginning of March, Dunbar had in beginning inventory 3,440 CDs with a unit cost of $10. During March, Dunbar made the following purchases of CDs.
| March 5 | 2,752 | @ | $11 |
| March 13 | 4,816 | @ | $12 |
| March 21 | 6,880 | @ | $14 |
| March 26 | 2,752 | @ | $15 |
During March 16,512 units were sold. Dunbar uses a periodic inventory system.
(a) Determine the cost of goods available for sale.
(b) Calculate Average Cost. (Round answer to 3 decimal places, e.g. 5.125.)
Expert Solution
Cost of Goods Available for Sale = Value of Opening Stock + Value of Purchases
Value of Opening Stock = 3440 Units * $10 = $34,400
Value of Purchases = (2,752 Units * $11) + (4,816 Units * $12) + (6,880 Units* $14) + (2,752 Units * $15)
Value of Purchases = $30,272 + $57,792 + $96,320 + $41,280 = $225,664
Cost of Goods Available for Sale = $34,400 + $225,664 = $260,064
Average Cost = Cost of Goods Available for Sale/ (Opening Stock Units + Purchases Units)
Average Cost = $260,064/ (3440 Units+ (2,752 Units+4,816 Units+6,880 Units+2,752 Units))
Average Cost = $260,064/ 20640 Units = $12.6 per Unit
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