The firm had a beginning inventory of 50 units with a unit cost of $10.Purchases during the year were as follows: March-50 units with a unit cost of $12;July-60 units with a unit cost of $15.If the average cost method is used,the value of the ending inventory of 45 units is

Question

Quizplus · Accepted Answer

To compute the cost of ending inventory using the average cost method, we need to first calculate the weighted average cost per unit.

Weighted Average Cost per Unit = (Beginning Inventory Value + Purchases Value) / (Beginning Inventory Units + Purchases Units)

Beginning Inventory Value = 50 units x $10 per unit = $500 
Purchases Value = (50 units x $12 per unit) + (60 units x $15 per unit) = $900 
Beginning Inventory Units = 50 units 
Purchases Units = 50 units + 60 units = 110 units

Weighted Average Cost per Unit = ($500 + $900) / (50 units + 110 units) = $10.91 per unit

To find the value of the ending inventory of 45 units, we simply multiply the number of units by the weighted average cost per unit:

Ending Inventory Value = 45 units x $10.91 per unit = $490.95

Therefore, the best choice is B.

The Firm Had a Beginning Inventory of 50 Units with a Unit