At May 1, 2017, Heineken Company had beginning inventory consisting of 300 units with a unit cost of $7. During May, the company purchased inventory as follows:
600 units at $7
900 units at $8
The company sold 1,500 units during the month for $12 per unit. Heineken uses the average cost method. The value of Heineken's inventory at May 31, 2017 is
A)$2,100
B)$2,250
C)$2,400
D)$13,500

Question

Quizplus · Accepted Answer

To calculate the ending inventory using the average cost method, first determine the total cost of all units available for sale and the total number of units. Total cost = (300 units x $7) + (600 units x $7) + (900 units x $8) = $2,100 + $4,200 + $7,200 = $13,500. Total units = 300 + 600 + 900 = 1,800 units. Average cost per unit = $13,500 / 1,800 units = $7.50. Ending inventory = (1,800 units - 1,500 units sold) x $7.50 = 300 units x $7.50 = $2,250.

At May 1, 2017, Heineken Company Had Beginning Inventory Consisting