Question

Chess Top uses the periodic inventory system. For the current month, the beginning inventory consisted of 480 units that cost $65 each. During the month, the company made two purchases: 720 units at $68 each and 360 units at $70 each. Chess Top also sold 1,200 units during the month. Using the average cost method, what is the amount of ending inventory?

Answer 1

To determine the ending inventory using the average cost method, calculate the total cost of goods available for sale, calculate the total number of units available for sale, calculate the average cost per unit, and multiply it by the remaining units in inventory.

Step-by-step explanation:

To calculate the ending inventory using the average cost method, we need to follow these steps:

1. Calculate the total cost of goods available for sale by adding the cost of beginning inventory and the cost of purchases: (480 units x $65 each) + (720 units x $68 each) + (360 units x $70 each).
2. Calculate the total number of units available for sale by adding the beginning inventory and the purchases: 480 units + 720 units + 360 units.
3. Use the formula: Average cost per unit = Total cost of goods available for sale / Total number of units available for sale.
4. Multiply the average cost per unit by the remaining units in inventory to calculate the ending inventory.

By performing these calculations, we can determine the amount of ending inventory using the average cost method.

Answer 2

The cost of ending inventory is $24314.

Step-by-step explanation:

Under the average cost method, the inventory is valued at the average cost of all the inventory that is available from the start of the month and the purchases made.

The average cost of inventory can be calculated by summing up the total cost of beginning inventory and purchases and dividing it by the total number of units available for sale.

Average cost per unit = [ 480*65 + 720*68 + 360*70 ] / [480 + 720 + 360]

Average cost per unit = 67.538 rounded off to $67.54 per unit

The total inventory available for sale = 480+720+360 = 1560 units

The ending inventory in units = 1560 - 1200 = 360 units

The cost of ending inventory = 360 * 67.54 = $24314.4 rounded off to $24314