Stabler, Inc.provided the following inventory transaction summary for January: $\begin{array}{lr}
1/1&\text {Purchased 200 units@\$3.00 per unit. }\
1/15&\text { Sold 40 units. }\
1/21&\text {Purchased 300 units@\$5.00 per unit }\
1/31&\text { Purchased 40 urits@\$10.00 per unit}\
\end{array}$
In addition, it has been determined that Stabler's inventory at the beginning of the month was $400.00 (200 units).What was Stabler's cost per unit at the end of January, using the moving average method?
A)$3.00
B)$2.00
C)$4.00
D)$6.00

Question

Stabler, Inc.provided the following inventory transaction summary for January: $\begin{array}{lr}
1/1&\text {Purchased 200 units@\$3.00 per unit. }\
1/15&\text { Sold 40 units. }\
1/21&\text {Purchased 300 units@\$5.00 per unit  }\
1/31&\text { Purchased 40 urits@\$10.00 per unit}\
\end{array}$
 In addition, it has been determined that Stabler's inventory at the beginning of the month was $400.00 (200 units).What was Stabler's cost per unit at the end of January, using the moving average method?
A)$3.00
B)$2.00
C)$4.00
D)$6.00

Quizplus · Accepted Answer

Under the moving average method, the cost per unit is recalculated after each purchase. The calculation is as follows:1. Beginning inventory: 200 units @ $3.00 = $600.2. Purchase on 1/21: 300 units @ $5.00 = $1500.   Total units = 500, Total cost = $2100, Average cost = $2100 / 500 = $4.20 (not directly relevant but helps in understanding the flow).3. Sale on 1/15: 40 units (this reduces the number of units but does not affect the cost per unit directly).4. Purchase on 1/31: 40 units @ $10.00 = $400.   Total units before this purchase (after the sale) = 460, Total cost before this purchase = $2100 - (40 units * previous average cost; not directly needed for final calculation).   New total units = 500 (460 + 40), New total cost = $2500 ($2100 + $400).   New average cost = $2500 / 500 = $5.00.However, the calculation above includes a mistake in the final step, as it incorrectly adds back the sold units to the total. Correcting this:1. Initial inventory + first purchase = 200 units + 300 units = 500 units at a total cost of $600 + $1500 = $2100.2. After the sale of 40 units, we have 460 units left, but we focus on purchases for the moving average.3. The final purchase adds 40 units at $10 each = $400, making the total cost $2100 (from steps 1 and 2) + $400 = $2500.4. The correct ending inventory count before the last purchase is 460 units (after selling 40 units), and after the last purchase, it's 500 units. The calculation of the average cost should consider the total cost divided by the total units after each transaction.Given the error in the step-by-step explanation, the correct approach to find the moving average cost per unit at the end of January should consider the total cost of inventory divided by the total units available at each point of purchase, adjusting for sales. The correct calculation involves summing up the costs of purchases and dividing by the total units at the end of the period, considering all purchases and sales.The correct answer, based on the moving average method and the provided transactions, should reflect the average cost per unit after accounting for all purchases and sales up to the end of January. The initial mistake in calculation led to an incorrect explanation of the process. The correct average cost needs to account for the total cost of purchases ($600 for the first 200 units, $1500 for the next 300 units, and $400 for the last 40 units) and the total units available at the end of January, without mistakenly adding back the sold units.

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