Question

Blossom Marine Products began the year with 10 units of marine floats at a cost of $12 each. During the year, it made the following purchases: May 5, 27 units at $16; July 16, 19 units at $20; and December 7, 24 units at $23. Assume there are 29 units on hand at the end of the period. Blossom uses the periodic system.

Answer 1

To calculate the cost of goods sold (COGS) using the periodic inventory system, we need to determine the total cost of the units sold during the year and subtract it from the total cost of the units available for sale. We are given the following information:

1. Beginning inventory: 10 units at $12 each.
2. Purchases:
- May 5: 27 units at $16 each.
- July 16: 19 units at $20 each.
- December 7: 24 units at $23 each.
3. Ending inventory: 29 units.

First, calculate the total cost of the units available for sale:

Beginning inventory cost = 10 units * $12/unit = $120

May purchase cost = 27 units * $16/unit = $432
July purchase cost = 19 units * $20/unit = $380
December purchase cost = 24 units * $23/unit = $552

Total cost of units available for sale = $120 + $432 + $380 + $552 = $1,484

Now, we need to calculate the cost of goods sold (COGS). To do this, we subtract the ending inventory cost from the total cost of units available for sale:

COGS = Total cost of units available for sale - Ending inventory cost

Ending inventory cost = 29 units * (average cost per unit)
Average cost per unit = Total cost of units available for sale / Total units available for sale

Average cost per unit = $1,484 / (10 + 27 + 19 + 24 - 29) = $1,484 / 51 ≈ $29.10 per unit

Now, calculate the ending inventory cost:

Ending inventory cost = 29 units * $29.10/unit ≈ $844.90

Finally, calculate COGS:

COGS = $1,484 - $844.90 ≈ $639.10

So, the cost of goods sold for Blossom Marine Products for the year is approximately $639.10.