Average Cost Inventory Method
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- Опубліковано 4 жов 2024
- This video explains how to use the average cost method to calculate cost of goods sold and ending inventory. An example is presented to illustrate how the average cost method is used to compute COGS and inventory.
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No problem. Stay tuned to www.edspira.com this semester. I'll be uploading exercises and quizzes to accompany the managerial accounting videos. Best of luck to you!
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Thank you SO MUCH for making the FIFO, LIFO, and Average Cost Videos! You made it WAY easier and explained it much better than my professor did. She always moves so quickly so I thought that these were much more difficult than they actually are. Thank you for making it so easy!
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Gobind Rawat, I'm glad you liked this video! I actually have an entire financial accounting course that is available for free on my website. It currently has 249 videos, and I'm actively adding practice exercises and quizzes. You can check it out here: edspira.com/courses/financial-accounting Thanks for watching!
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I have been watching your videos. My question is if you are a business owner which accounting method do you use ?? FIFO, LIFO, Average cost ?? Do you pick whichever one you want ?? What does the IRS say about that ???
I think the most important thing is the consistency principle. You must stick with the same method for all financial periods.
If you want investors, use FIFO. If you want lower taxes, use LIFO. If you want some of both, use the weighted average.
All are GAAP. LIFO is not accepted by IFRS.
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Happy to help!
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how did you get 250? beginning inventory is 200
Where is this typically used to best effect?
What industries and circumstances?
Thanks sir really helped me
No problem!
thank you
No problem!
Hi! I´m studying accounting online and I´m not the best at it but trying super hard, THANK YOU for the video, it made perfect sense, do you provide online tutorship? or know someone who does? thank you!
What if you are only given the Beginning inventory, Purchases during the year and how many shirts were sold in a year?
Thank you...just.....thank you.
No problem!
what about deductions / returns / damages ? why not a single instructor talks about that?
Thanks a million!
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Time to record more COGS and pay less taxes!
How would you find the AVERAGE unit PRICE if you have balance stock from last period brought over for NEXT period?
Is this method the same as the weighted average method?
THANK YOU SO MUCH !
Thanks
Thank you!
No problem! Good luck with your classes and have a great summer!!
If I run a business and sell all inventory on hand , will I eventually get the same profit number for FIFO, LIFO and AVCO?
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Is the Average Cost inventory Method the same as the Weighted Average Method ?
Thanks you for the video !
cant you also just subtract the COGS from the total buy cost for the EI?
Can we also call the 12.87 as the Moving Average Inventory?
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can you please give an example (may be the same example) where there is purchase returns (or please illustrate that in a replay comment)
thank you for the video
No problem!
would you be able to help out on the calculation if there is a sales return and purchase return, thanks very much
So that mean, under the average cost method, the flow of costs through the accounting records will exactly match to the physical flow of goods through the business?
Priscila A Under average cost, whenever a good is sold (and thus flows out of the business) it will be assigned a cost that is the weighted average of the purchase costs of the goods that are in the inventory. If a company wants to have the cost of each item exactly match its purchase cost, it would need to use the "specific identification method." However, to use specific identification it would need to know the exact purchase price of each item so it can assign an item this exact price when it sells the item. Since it is difficult to keep track of the cost of individual items (for example, a large grocery store might purchase multiple cases of soap throughout the year, at different prices) it is easier to just pool all the purchase costs together, take the weighted average, and use this weighted average to assign a cost to an item when it is sold. Hope this helps!
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Thanks 🤗
How does it effect the average if you have a beginnning inventory
In gist, it is Total Cost Price divided by the Total Units Purchased.
In getting the EI, first calculate as mentioned earlier, and multiply it by # of inventories in hand.
Is my understanding correct ?
Lets say that you buy over 100,000 different items for production over the course of a year... I assume there is software out there that can compute this for you?
Yes, all large companies (and many small companies) use software to track inventory
What happens if I sell another 250 t shirts on a different date how do I get COGS
In its first month of operations, Kingbird, Inc. made three purchases of merchandise in the following sequence: (1) 260 units at $4, (2) 360 units at $6, and (3) 460 units at $7. Assuming there are 160 units on hand at the end of the period.
Calculate average unit cost. (Round answer to 3 decimal places, e.g. 5.125.)
Compute the cost of the ending inventory under the average-cost method, assuming there are 160 units on hand. (Round answer to 0 decimal places, e.g. 125.)
Can someone please help... I am so unsure what part I am missing??
I also get free inventory. would I just add these free units and come up with a new average?
It this the same as the moving weighted average method?
thanks. the book made it so complicating lol
Why are there so many dislikes?
how would you calculate COGS if you are not given just 1 number of sales, it says on mine sold 200 units @ 350, and 100 units at 400
First you need to calculate the average cost of inventory. (This is total cost divided by total units) then you would multiply the average cost of inventory by 300 since this is the number of units sold. Good question!
why is COGS $250 ? i got lost in that part , sorry
legend