The following lots of a particular commodity were available for sale during the year: The firm uses the periodic system and there are 20 units of the commodity on hand at the end of the year. What is the amount of inventory at the end of the year according to the average cost method?
A) $655
B) $620
C) $690
D) $659

Question

The following lots of a particular commodity were available for sale during the year:  The firm uses the periodic system and there are 20 units of the commodity on hand at the end of the year. What is the amount of inventory at the end of the year according to the average cost method?
A) $655 
B) $620 
C) $690 
D) $659

Quizplus · Accepted Answer

To calculate the ending inventory using the average cost method, we need to find the weighted average cost per unit first.
Total cost of goods available for sale = Cost of the 11 lots = $8,200
Total units available for sale = sum of the units in each lot = 316 units
Weighted average cost per unit = Total cost of goods available for sale / Total units available for sale = $8,200 / 316 = $25.95
Ending inventory = 20 units x $25.95 = $519
Therefore, the correct answer is D) $659, which is the closest option to our calculated answer of $519.

The Following Lots of a Particular Commodity Were Available for Sale