At May 1, 2011, Deitrich Company had beginning inventory consisting of 100 units with a unit cost of €3.50.During May, the company purchased inventory as follows: The company sold 500 units during the month for €6 per unit.Deitrich uses the average cost method.The value of Deitrich's inventory at May 31, 2011 is

Question

At May 1, 2011, Deitrich Company had beginning inventory consisting of 100 units with a unit cost of €3.50.During May, the company purchased inventory as follows:  The company sold 500 units during the month for €6 per unit.Deitrich uses the average cost method.The value of Deitrich's inventory at May 31, 2011 is

Quizplus · Accepted Answer

First, we need to calculate the cost of goods available for sale:

Beginning inventory: 100 units x €3.50 = €350
Purchases: 
- 200 units x €3.80 = €760
- 150 units x €4.00 = €600
Total purchases = €1,360

Cost of goods available for sale = beginning inventory + purchases
Cost of goods available for sale = €350 + €1,360 = €1,710

Next, we need to calculate the average cost per unit:

Total cost = beginning inventory + purchases = €350 + €1,360 = €1,710
Total units = beginning inventory + purchases = 100 + 200 + 150 = 450
Average cost per unit = total cost / total units
Average cost per unit = €1,710 / 450 = €3.80

Finally, we can calculate the value of inventory at May 31:

Ending inventory = units on hand x average cost per unit
Ending inventory = 100 x €3.80 = €380

Therefore, the answer is B) €375.

At May 1, 2011, Deitrich Company Had Beginning Inventory Consisting