The Liu Company started the year with 1,000 units in inventory, which cost $3 each. During January, it bought 7,000 units, which cost $4 each. During January, it sold 6,000 units, leaving it with 2,000 units at the end of the month. If it uses the weighted average method of accounting for inventory, the ending inventory value is
A) 6000
B) 7000
C) 7750
D) 8000

Question

Quizplus · Accepted Answer

To calculate the weighted average cost per unit:
(1,000 units * $3) + (7,000 units * $4) = $31,000
Total cost of inventory = $31,000
Total units = 8,000 units
Weighted average cost per unit = $31,000 ÷ 8,000 units = $3.875

The cost of ending inventory is:
2,000 units * $3.875 = $7,750

Therefore, the correct answer is C) 7750.

The Liu Company Started the Year with 1,000 Units in Inventory