Question

Using the data below, determine the ending inventory amount assuming the weighted average method with a periodic inventory system. Beginning inventory, 10 units Purchases, 20 units Total cost of units available for sale, $3,000 Ending inventory, 12 units $3,000 $100 $1,200 None of these choices are correct.

Answer 1

Correct Choice is $ 1200.

Step-by-step explanation:

To calculate cost of ending inventory with the help of weighted average method of inventory valuation in case of periodic inventory system, first we have to calculate the unit cost.

In Periodic inventory system, Weighted average unit cost can be calculated as;

Weighted average Unit Cost = Total Cost of Inventory in Hand/ Total inventory/units in Hand ---------- (I)

Considering given data of the problem,

Beginning inventory = 10 units

Purchases = 20 units

Total units in Hand = Beginning Inventory + Purchases

Total units in Hand = 10 units + 20 units = 30 units

Cost of inventory available for sale/Cost of inventory in hand = $ 3,000

Putting the values in equation (I), we get ;

Weighted average Unit Cost = $ 3,000/30

Weighted average Unit Cost = $ 100

According to given information of the problem/question, ending inventory is composed of 12 units.

Thus, Ending inventory = 12 units x $ 100 = $ 1,200.