Question

At May 1, 2020, had beginning inventory consisting of 190 units with a unit cost of $7.30. During May, the company purchased inventory as follows: 720 units at $7.30 590 units at $5.80 The company sold 1030 units during the month for $14 per unit. Sheridan uses the average cost method. The average cost per unit for May is

Answer 1

Average cost of inventory =$6,911.3

Explanation:

Given:

Opening inventory cost = 190 unit × $7.30 = $1,387

Purchase cost 1 = 720 unit × $7.30 = $5,256

Purchase cost 2 = 590 unit × $5.80 = $3,422

Total cost of inventory = $1,387 + $5,256 + $3,422

Total cost of inventory = $10,065

Total selling price = 1030 unit × $14

Total selling price = $14,420

Computation of average cost of inventory for 1,030 units

Average cost of inventory = Total cost of inventory × [1030/(190+720+590)]

Average cost of inventory = 10,065 × [1030/1,500]

Average cost of inventory = 6,911.3