Question

Esquire Corp. uses the periodic inventory system. During its first year of operations, Esquire made the following purchases (list in chronological order of acquisition):

20 units at $50
35 units at $40
85 units at $30
Sales for the year totaled 135 units, leaving 5 units on hand at the end of the year.Ending inventory using the average cost method is
a) $ 150
b) $ 177
c) $ 250
d) $1,540

Answer 1

To calculate the ending inventory using the average cost method in the periodic inventory system, you divide the total cost of goods available for sale by the total units available for sale and then multiply the average cost per unit by the number of units on hand.

Step-by-step explanation:

The average cost method is used to calculate ending inventory in the periodic inventory system.

To calculate the average cost per unit, you divide the total cost of goods available for sale by the total units available for sale. In this case, the total cost of goods available for sale is calculated as (20 x $50) + (35 x $40) + (85 x $30) = $1000. The total units available for sale is 20 + 35 + 85 = 140.

Therefore, the average cost per unit is $1000 / 140 = $7.14. To calculate the ending inventory, you multiply the average cost per unit by the number of units on hand, which is 5 in this case. So, the ending inventory using the average cost method is $7.14 x 5 = $35.70.