At May 1, 2014, Heineken Company had beginning inventory consisting of 200 units with a unit cost of $7. During May, the company purchased inventory as follows: 400 units at $7
600 units at $8
The company sold 1,000 units during the month for $12 per unit. Heineken uses the average cost method. The value of Heineken's inventory at May 31, 2014 is
A) $1,400
B) $1,500
C) $1,600
D) $9,000

Question

Quizplus · Accepted Answer

To find the ending inventory using the average cost method, first calculate the total cost of all units: (200 units x $7) + (400 units x $7) + (600 units x $8) = $1,400 + $2,800 + $4,800 = $9,000. The total number of units is 1,200. The average cost per unit is $9,000 / 1,200 = $7.50. Since 1,000 units were sold, 200 units remain in inventory. The value of the ending inventory is 200 units x $7.50 = $1,500.

At May 1, 2014, Heineken Company Had Beginning Inventory Consisting