Final answer:
The ending inventory balance at the end of the year using the average cost method is $916, after calculating the total cost of the inventory, determining the average cost per unit, and then multiplying by the 22 units on hand at year's end.
Step-by-step explanation:
To calculate the ending inventory balance at the end of the year using the average cost method, we must first determine the total cost of the available inventory and then divide by the total units available. We then multiply the average cost per unit by the number of units remaining at year's end to find the value of the ending inventory.
Here are the provided inventory quantities and costs:
- Beginning inventory: 10 units at $49
- First purchase: 18 units at $51
- Second purchase: 26 units at $20
- Third purchase: 15 units at $63
The total cost and units are as follows:
Total units = 10 + 18 + 26 + 15 = 69 units
Total cost = (10 * $49) + (18 * $51) + (26 * $20) + (15 * $63) = $490 + $918 + $520 + $945 = $2,873
Next, we calculate the average cost per unit:
Average cost = Total cost / Total units = $2,873 / 69 = $41.64 (not rounded)
To find the ending inventory value for 22 units on hand:
Ending Inventory = 22 units * $41.64 per unit = $916.08
Rounded to the nearest dollar, the ending inventory balance is $916.