The Radman Company began operation on January 1 of this year. It bought 600 units of inventory at $3 each on January 3, then it bought 400 units at $4 each in December. During the year it sold 900 items. Assuming it uses the weighted average method of accounting, its ending inventory of 100 units would be measured at
A) 300
B) 340
C) 350
D) 400

Question

Quizplus · Accepted Answer

Under the weighted average method, the cost of goods available for sale is divided by the total units available for sale to find the cost per unit. Radman Company bought a total of 600 units at $3 each and 400 units at $4 each. This results in a total cost of (600 * $3) + (400 * $4) = $1800 + $1600 = $3400. The total units bought were 600 + 400 = 1000 units. The weighted average cost per unit is $3400 / 1000 units = $3.40 per unit. The ending inventory of 100 units would be valued at 100 units * $3.40/unit = $340.

The Radman Company Began Operation on January 1 of This