A Company Has an Average Inventory on Hand of $90,000

question 149

Multiple Choice

A company has an average inventory on hand of $90,000 and its average days in inventory is 36.5 days. What is the cost of goods sold?

• A) $900,000
• B) $2,102,400
• C) $2,106,000
• D) $1,051,200

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Definitions:

Process Costing

A cost accounting method used for homogenous products that are produced in a continuous flow, involving computing the cost per unit by dividing total costs by the units produced.

Weighted-Average Method

An inventory costing method that calculates the cost of goods sold based on the average cost of all items available for sale during the period.

Cost Reconciliation

Cost reconciliation is the process of analyzing and adjusting the differences between the actual costs incurred and the standard or budgeted costs to understand variances in manufacturing or production activities.

Process Costing

Process costing is a method of costing used by companies that produce similar or homogenous products, where costs are accumulated over a period and then allocated to units of product.