Langer Company has the following inventory information. Assuming that a perpetual inventory system is used, what is the ending inventory (round all calculations to nearest dollar) under the moving-average cost method?

Question

Langer Company has the following inventory information.  Assuming that a perpetual inventory system is used, what is the ending inventory (round all calculations to nearest dollar) under the moving-average cost method?

Quizplus · Accepted Answer

Under the moving-average cost method, the cost per unit is recalculated after each purchase. To calculate the cost per unit, the total cost of goods available for sale is divided by the total units available for sale.

Total cost of goods available for sale = $19,700 + $17,500 = $37,200
Total units available for sale = 900 + 1,000 = 1,900

Cost per unit = $37,200 ÷ 1,900 = $19.58 (rounded to the nearest cent)

Using the moving-average cost method, the cost of goods sold and the cost of ending inventory are calculated as follows:

Date        Purchases    Sales    Balance    Cost per unit    Cost of goods sold    Balance
Jan. 1                              900          $18.00          
Feb. 26     $19,700               1,200                       $19.58                          $23,496
Apr. 19                            1,000          $21.00                                         $22,044
                                                               $19.76                $35,404        $460
                                                               × 230                       =

Therefore, the ending inventory is $2,986 (rounded to the nearest dollar). Thus, the correct answer is option C.

Langer Company Has the Following Inventory Information