# Financial Reporting And Analysis - Financial Reporting And Analysis Section 2

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 Raw materials \$56,000 Direct labor \$40,000 Storage of finished goods \$18,000 Abnormal costs \$6,000 Transportation of raw materials \$10,000

• Option : B
• Explanation : Inventory cost = Raw materials + Direct Labor + Transportation Inventory cost = 56,000 + 40,000 + 10,000 = 106,000. Abnormal cost and storage cost of finished goods are excluded from the cost of inventory.

 Opening inventory 0 units 1st purchase 500 units at \$30/unit 2nd purchase 1,000 units at \$33/unit 3rd purchase 1,200 units at \$34/unit Total Sales 2,000 units at \$50/unit

• Option :
• Explanation : Ending Inventory Weighted Average Calculations Units \$/unit Total \$ Purchase  #1 500 \$30 \$15,000 Purchase  #2 1000 \$33 \$33,000 Purchase #3 1200 \$34 \$40,800 Total available 2,700 \$88,800
Average cost = 88,800 / 2,700 = \$32.89 Ending inventory
= 2,700 – 2,000 = 700 units.Cost of ending inventory = \$32.89 * 700 = \$23,023

 Date Purchased Sold Cost perbale Price perbale January 1 180 0 200 250 February 1 20 150 210 250 March 1 0 25 225 275 April 1 200 0 225 275 May 1 100 0 250 280 June 1 0 175 275 300

• Option : A
• Explanation : Weighted average cost per unit = Total cost incurred ÷ Toatal units purchased. Weighted average cost per unit = [(180 * 200) + (20 * 210) + (200 * 225) + (100 * 250)] ÷ 500 = 110,200/500 = \$220.4 Ending inventory = Number of units remaining * weighted average cost Ending inventory = [(180 + 20 + 200 + 100) - (150 + 25 + 175)] * 220.4 = \$33,060.