At May 1, 2015, Kibbee Company had beginning inventory consisting of 200 units with a unit cost of $7. During May, the company purchased inventory as follows: 800 units at $7
600 units at $8
The company sold 1,000 units during the month for $12 per unit. Kibbee uses the average cost method. The value of Kibbee's inventory at May 31, 2015 is

Question

Quizplus · Accepted Answer

To calculate the value of inventory at May 31 using average cost method, we need to determine the average cost per unit first.

Total units purchased = 800 + 600 = 1,400
Total cost of units purchased = (800 x $7) + (600 x $8) = $5,600 + $4,800 = $10,400
Average cost per unit = Total cost of units purchased / Total units purchased = $10,400 / 1,400 = $7.43 (rounded to two decimal places)

Now we can use this average cost to calculate the value of inventory at May 31.

Units sold = 1,000
Units in ending inventory = 200 (same as beginning inventory)
Total units = Units sold + Units in ending inventory = 1,000 + 200 = 1,200

Value of inventory at May 31 = Average cost per unit x Units in ending inventory
Value of inventory at May 31 = $7.43 x 200 = $1,486

Therefore, the value of Kibbee's inventory at May 31, 2015 is $1,486. However, this value only represents the cost of inventory and not the selling price.

At May 1, 2015, Kibbee Company Had Beginning Inventory Consisting