Question

At May 1, 2018, Bonita Company had beginning inventory consisting of 170 units with a unit cost of $5.60. During May, the company purchased inventory as follows: 850 units at $5.60 580 units at $8.00 The company sold 1110 units during the month for $11 per unit. Bonita uses the average cost method. The average cost per unit for May is $6.600. $5.600. $6.470. $6.100.

Answer 1

Answer: $6.470

Step-by-step explanation:

The Average Cost method which is also known as the Weighted Average Cost method values inventory by assigning an average cost to all units based on the total cost of the individual units of purchases. This was each item has the same cost. It is calculated by Dividing the total cost of the inventory by the total number of units in the inventory.

Number of units = 170 units (beginning balance) + 850 + 580

= 1,600 units

Cost of Units = (170 * 5.60) + (850 * 5.60) + ( 580 * 8.00)

= 952 + 4,760 + 4,640

= $10,352

The Average Cost per Unit for May is,

= Total Cost / No. Of Units

= 10,352/ 1,600

= $6.470