Question

Use the information below to answer the following question. The following lots of a particular commodity were available for sale during the year: Beginning inventory 10 units at $60 First purchase 25 units at $65 Second purchase 30 units at $68 Third purchase 15 units at $75 The firm uses the periodic system, and there are 25 units of the commodity on hand at the end of the year. What is the amount of inventory at the end of the year rounded to the nearest dollar using the average cost method?

Answer 1

The amount of inventory at the end of the year is $1,684 taking into account the 25 units of the commodity

Step-by-step explanation:

In this case, the average cost method is used to determine the price per unit at the end of the yera taking into consideration the beginning inventory and the 3 purchases made during the year.

For each new entrance in the stock, it is necessary to calculate the unit price at the average cost method:

• Beginning inventory: 10 units at $60 : $600
• First purchase 25 units at $65: $1625, unit price = 600 + 1625 / 10 + 25 = $63.6

• Second purchase 30 units at $68: $2040, unit price = 600 + 1625 + 2040/ 10 + 25 + 30 = $65.6

• Third purchase 15 units at $75: $1125, unit price = 600 + 1625 + 2040 + 1125/ 10 + 25 + 30 + 15 = $67.4

At the end of the year, there are 25 units at $67.4 =$1,684

Incoming Stock

Quantity Price Total Quantity Price Total

10 60 600

25 65 1625 35 63,6 2225

30 68 2040 65 65,6 4265

15 75 1125 80 67,38 5390