Question

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

42 units at $104 per unit
71 units at $86 per unit
173 units at $62 per unit

Sales for the year totaled 266 units, leaving 20 units on hand at the end of the year.

Ending inventory using the average cost method is: (Do not round unit cost calculation. Round your final answer to the nearest whole dollar amount.)

Multiple Choice

A. $1,290.

B. $2,080.

C. $1,483.

D. $1,240

Answer 1

The ending inventory value using the average cost method is calculated as the total cost of all purchases divided by the total number of units purchased to get the average cost per unit, and then this average cost is applied to the units remaining at the end of the year. In this scenario, the ending inventory is $1,483.

Step-by-step explanation:

The student is asking how to calculate the ending inventory using the average cost method under a periodic inventory system. To find the ending inventory value, we first need to calculate the total cost of all purchases and then determine the average cost per unit before applying it to the units left at the end of the period.

Firstly, we calculate the total cost of purchases: (42 units × $104) + (71 units × $86) + (173 units × $62) = $4,368 + $6,106 + $10,726 = $21,200.

Now, we calculate the total number of units purchased, which is 42 + 71 + 173 = 286 units. The average cost per unit is then $21,200/286 units = $74.13 per unit.

Since 266 units were sold, we have 286 - 266 = 20 units left. Lastly, the value of the ending inventory using the average cost method is 20 units × $74.13 per unit = $1,482.60, rounded to the nearest whole dollar amount gives us $1,483. Therefore, the correct answer is C. $1,483.