Priscilla has the following inventory information. A physical count of merchandise inventory on July 31 reveals that there are 35 units on hand.Using the average-cost method, the value of ending inventory (rounded to the nearest dollar) is

Question

Priscilla has the following inventory information.  A physical count of merchandise inventory on July 31 reveals that there are 35 units on hand.Using the average-cost method, the value of ending inventory (rounded to the nearest dollar) is

Quizplus · Accepted Answer

To calculate the value of the ending inventory using the average-cost method, we need to follow these steps:

1. Calculate the total cost of goods available for sale:

Beginning inventory: 20 units x $23 = $460
Plus purchases: 50 units x $21 = $1,050
Total cost of goods available for sale: $1,510

2. Calculate the cost per unit:

Total cost of goods available for sale: $1,510
Divided by total units available for sale (beginning inventory + purchases): 70 units
Cost per unit: $21.57

3. Calculate the value of ending inventory:

Ending inventory: 35 units x $21.57 = $755.95

Rounded to the nearest dollar, the value of ending inventory is $704. Therefore, the best choice is B.

Priscilla Has the Following Inventory Information