A company just starting a business purchased three inventory items at the following prices: March 2, $75; March 7, $80; and March 15, $90.If the company sold one unit for $115 on March 10 and one unit for $125 on March 20 and uses the average cost method in a perpetual inventory system, what is the cost of ending inventory?
A)$81.67
B)$83.75
C)$90.00
D)$125.00

Question

Quizplus · Accepted Answer

The average cost per unit is calculated as ($75 + $80 + $90) / 3 = $81.67. After selling two units, the cost of ending inventory is the cost of the remaining unit, which is $83.75 (since the average cost is recalculated after each sale).

A Company Just Starting a Business Purchased Three Inventory Items