The following units of an inventory item were available for sale during the year. Use this information to answer the following questions.
$$\begin{array} { l l }
\text { Beginning inventory } & 10 \text { units at } \$ 55 \
\text { First purchase } & 25 \text { units at } \$ 60 \
\text { Second purchase } & 30 \text { units at } \$ 65 \
\text { Third purchase } & 15 \text { units at } \$ 70
\end{array}$$ The firm uses the periodic inventory system. During the year, 60 units of the item were sold.

-The ending inventory cost rounded to nearest dollar using average cost is:
A) $1,353
B) $1,263
C) $1,375
D) $1,150

Question

The following units of an inventory item were available for sale during the year. Use this information to answer the following questions.
 $$\begin{array} { l l } 
\text { Beginning inventory } & 10 \text { units at } \$ 55 \
\text { First purchase } & 25 \text { units at } \$ 60 \
\text { Second purchase } & 30 \text { units at } \$ 65 \
\text { Third purchase } & 15 \text { units at } \$ 70
\end{array}$$ The firm uses the periodic inventory system. During the year, 60 units of the item were sold.
​
-The ending inventory cost rounded to nearest dollar using average cost is:
A) $1,353
B) $1,263
C) $1,375
D) $1,150

Quizplus · Accepted Answer

To calculate the ending inventory cost using the average cost method under a periodic inventory system, first, determine the total cost of goods available for sale by adding the cost of beginning inventory and purchases. Then, divide this total cost by the total units available for sale to find the average cost per unit. Finally, multiply the average cost per unit by the units remaining in ending inventory.Total cost of goods available for sale:$$= (10 \times \$55) + (25 \times \$60) + (30 \times \$65) + (15 \times \$70)$$$$= \$550 + \$1,500 + \$1,950 + \$1,050$$$$= \$5,050$$Total units available for sale:$$= 10 + 25 + 30 + 15 = 80$$Average cost per unit:$$= \$5,050 / 80 = \$63.125$$Units in ending inventory:$$= 80 - 60 = 20$$Ending inventory cost:$$= 20 \times \$63.125 = \$1,262.5$$Rounded to the nearest dollar, the ending inventory cost is \$1,263.

The Following Units of an Inventory Item Were Available for Sale