Question

Given the following​ data, calculate the cost of ending inventory using the average cost method.​ (Round any intermediary and final answers to two decimal​ places.)

Date Item Unit
1/1 Beginning Inventory 40 units at $30 per unit
3/5 Purchase of Inventory 20 units at $10 per unit
5/30 Purchase of Inventory 25 units at $22 per unit
12/31 Ending Inventory 20 units

(A) $413 (B) $459 (C) $200 (D) $550

Answer 1

(B) $459

Step-by-step explanation:

For computing the average cost per unit is shown below:

= (Beginning inventory units × price per unit + purchase inventory units × price per unit + purchase inventory units × price per unit ) ÷ (Beginning inventory units + purchase inventory units + purchase inventory units)

= (40 units × $30 + 20 units × $10 + 25 units × $22) ÷ (40 units + 20 units + 25 units)

= ($1,200 + $200 + $550 units ) ÷ (85 units)

= ($1,950 units) ÷ (85 units)

= $22.94 per unit

Now the ending inventory would be

= Ending inventory units × average cost per unit

= 20 units × $22.18 per unit

= $458.82

The purchase units = 20 units + 20 units = 40 units