Nolvo Company uses the periodic inventory system.For February 2011, the beginning inventory consisted of 100 units that cost CHF65 each.During the month, the company made two purchases: 400 units at CHF68 each and 150 units at $72 each.Nolvo sold 500 units during the month of February at CHF110 per unit.Using the average cost method, what is the amount of ending inventory at February 28, 2011?

Question

Quizplus · Accepted Answer

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

Weighted average cost per unit = (Beginning inventory cost + Purchases cost) / (Beginning inventory units + Purchases units)

Weighted average cost per unit = ((100 x CHF65) + (400 x CHF68) + (150 x CHF72)) / (100 + 400 + 150) = CHF68.46

Now, we can calculate the value of ending inventory as:

Ending inventory value = Ending inventory units x Weighted average cost per unit

Ending inventory units = Beginning inventory units + Purchases units - Units sold
Ending inventory units = 100 + 400 + 150 - 500 = 150 units

Ending inventory value = 150 x CHF68.46 = CHF10,269

Therefore, the correct answer is option C.

Nolvo Company Uses the Periodic Inventory System