Question

Assuming there are 200 units on hand, compute the cost of the ending inventory under the average-cost method. (Round answer to 0 decimal places, e.g. 1,250.) The cost of the ending inventory In its first month of operations, Cullumber Company made three purchases of merchandise in the following sequence: (1) 100 units at $5, (2) 400 units at $6, and (3) 100 units at $7. (a1) Calculate the weighted-average unit cost. (Round answer to 3 decimal places, e.g. 15.225.)

Answer 1

The weighted-average unit cost is $6 per unit, calculated by dividing the total cost of inventory purchased ($3600) by the total units purchased (600). The cost of the ending inventory under the average-cost method for 200 units on hand is $1200.

Step-by-step explanation:

To determine the weighted-average unit cost of inventory, we first calculate the total cost of all units purchased:

• 100 units at $5 each = $500
• 400 units at $6 each = $2400
• 100 units at $7 each = $700
• Total cost of purchases = $500 + $2400 + $700 = $3600
• Total units purchased = 100 + 400 + 100 = 600 units

We calculate the weighted-average unit cost by dividing the total cost by the total units purchased:

Weighted-average unit cost = Total cost / Total units = $3600 / 600 units = $6 per unit

To calculate the cost of the ending inventory under the average-cost method, we multiply the ending inventory units by the weighted-average unit cost:

Cost of ending inventory = 200 units * $6 per unit = $1200

The cost of the ending inventory using the average-cost method is $1200.