Question

Chess Top uses the periodic inventory system. For the current month, the beginning inventory consisted of 360 units that cost $65 each. During the month, the company made two purchases: 540 units at $68 each and 270 units at $70 each. Chess Top also sold 900 units during the month. Using the average cost method, what is the amount of ending inventory

Answer 1

Using the average cost method, the amount of ending inventory is $ 18,235.50

Step-by-step explanation:

Chess Top

Periodic inventory system

For the current month,

Units Unit Cost Total

Beginning inventory 360 $65 23400

Purchases: 540 units $68 36720

Purchases 270 units $70 18900

Total 1170 79020

We add the total units and total cost of the units and then divide the total cost by the total number of units to get the average cost per unit.

Average Cost= Total Cost/ Total Units

= 79020/1170= $ 67.54 per unit

Sales 900 units (given)

Ending Inventory = Total Units Less Sales

Ending Inventory = 1170- 900 = 270 units

Average Cost of Ending Inventory = 270 units * $ 67.54= $ 18,235.50

Answer 2

$18,235.80

Step-by-step explanation:

Under the average cost method an entity calculates a new unit cost of inventory following each purchase.

Unit Cost = Total Cost / Total Number of Units

Purchase 1 and 2

Unit Cost = Total Cost / Total Number of Units

= ((360 units×$65)+(540 units×$68)+(270 units× $70))/1170 units

=$79,020/1170 units

= $67,54

Inventory Balance

Ending Inventory (Periodic) = (360 units+540 units +270 units-900 units)

= 270 units

Inventory Cost = 270 units× $67,54 =$18,235.80