The firm had a beginning inventory of 50 units with a unit cost of $12. Purchases during the year were as follows: March-65 units with a unit cost of $13; July-60 units with a unit cost of $16. Assuming a periodic inventory system and the average cost method is used, the value of the ending inventory of 55 units is: (Round to two decimal places.)

Question

Quizplus · Accepted Answer

The average cost method computes the average cost per unit of all items available for sale during the period, and then multiplies that average cost by the number of units in ending inventory.

Here is the calculation for the average cost per unit:

Beginning inventory: 50 units @ $12 = $600
Purchases:
- March: 65 units @ $13 = $845
- July: 60 units @ $16 = $960
Total cost of goods available for sale = $600 + $845 + $960 = $2,405
Total units available for sale = 50 + 65 + 60 = 175

Average cost per unit = Total cost / Total units
= $2,405 / 175
= $13.74 per unit

To determine the value of the ending inventory of 55 units, multiply the average cost per unit by the number of units in ending inventory:

Ending inventory: 55 units @ $13.74 = $755.70

Therefore, the best choice is C.

The Firm Had a Beginning Inventory of 50 Units with a Unit