Student Doubts Forum

2122 Spring Midterm Q1

2122 Spring Midterm Q1

by Seif Nazir Sacoor -
Number of replies: 1

Hello,

In question 1, I calculated the COGM as follows:

COGM = DM + DL + MOH - ch.WIP

Given that we do not have ch.WIP, COGM = MC = DM + DL + MOH

The firm is using WAC for inventory valuation, so I did ((1000x6,5€)+(1500x8€))=€18 500,00 

Therefore, COGM = 18500 + 30000 + 50000 + 12000 =110 500 

However, the correct answer is 110 750€. Could you please tell me where I did a mistake?

Thank you in advance

In reply to Seif Nazir Sacoor

Re: 2122 Spring Midterm Q1

by Pedro Pinto da Silva Perdigão -
Hello Seif,

Your mistake was on the calculation of the consumption of Direct Materials. You need to first calculate the WAC of all units, get to the COGM/unit and then multiply by the number of units.

So, (1 000*6,5€ + 2 000*8€) / 3 000, which would get you a COGM/unit of 7,5€

Then you just have to multiply by the 2 500 units used, and you would get 18 750€ instead of 18 500€.

Good study!