Flex Co uses a periodic inventory system The following are i

Flex Co. uses a periodic inventory system. The following are inventory transactions for the month of January:

1/1

Beginning inventory

10,000 units at $3

1/5

Purchase

5,000 units at $4

1/15

Purchase

5,000 units at $5

1/20

Sales at $10 per unit

10,000 units

Flex uses the average pricing method to determine the value of its inventory. What amount should Flex report as cost of goods sold on its income statement for the month of January?

1/1	Beginning inventory	10,000 units at $3
1/5	Purchase	5,000 units at $4
1/15	Purchase	5,000 units at $5
1/20	Sales at $10 per unit	10,000 units

Solution

Units Unit cost Total Beginning inventory 10000 3 30000 5-Jan 5000 4 20000 15-Jan 5000 5 25000 Total 20000 75000 Average cost = 75000/20000= $3.75 Cost of goods sold = 10000*3.75 = $37500