Question

Ayayai Corp. has the following inventory data:

July 1 Beginning inventory 66 units at $19 $1254
7 Purchases 231 units at $20 4620
22 Purchases 33 units at $22 726 $6600

A physical count of merchandise inventory on July 30 reveals that there are 110 units on hand. Using the average cost method, the value of ending inventory is _______.

Answer 1

Using the average cost method, the value of ending inventory is $2,200

Step-by-step explanation:

Ayayai Corp. uses average cost method. The company counts merchandise inventory on July 30 (the company uses periodic inventory system).

Average cost = Total Cost of Inventory /Total Units in Inventory

1. Beginning inventory: 66 units at $19, total cost $1,254

2. 7 July, Purchases: 231 units at $20, total cost $4,620

3. 22 July, Purchases purchase: 33 units at $22, total cost $726

Total purchase in the period: 264 units, total cost $5,346

Average cost = ($1,254 + $5,346 )/(66 + 264) = $6,600/330 = $20 per unit

On July 30, there are 110 units on hand

The value of ending inventory = 110 x $20 = $2,200