Nolvo Company uses the periodic inventory system. For February 2014, the beginning inventory consisted of 400 units that cost CHF65 each. During the month, the company made two purchases: 1,600 units at CHF68 each and 600 units at CHF72 each. Nolvo sold 2,000 units during the month of February at CHF110 per unit. Using the average cost method, what is the amount of ending inventory at February 28, 2014?
A) CHF43,200.
B) CHF42,000.
C) CHF41,076.
D) CHF39,000.

Question

Quizplus · Accepted Answer

To calculate the ending inventory using the average cost method, we need to find the weighted average cost per unit of inventory available.

Weighted average cost per unit = Total cost of inventory available / Total units of inventory available
Total cost of inventory = (400 x 65) + (1600 x 68) + (600 x 72) = CHF 222,000
Total units of inventory = 400 + 1600 + 600 = 2600

Weighted average cost per unit = 222,000 / 2600 = CHF 85.38

Ending inventory = Units of inventory on hand x Weighted average cost per unit
Ending inventory = (2600 - 2000) x 85.38 = CHF 41,076

Nolvo Company Uses the Periodic Inventory System