Santa Fe Tile Company had the following inventory purchases and sales during the month of May. The company uses the periodic inventory method. If Santa Fe uses average-cost, how much was the Ending inventory balance?

Question

Santa Fe Tile Company had the following inventory purchases and sales during the month of May. The company uses the periodic inventory method.  If Santa Fe uses average-cost, how much was the Ending inventory balance?

Quizplus · Accepted Answer

Using the average-cost method, we can calculate the cost per unit by dividing the total cost of inventory by the total number of units.

Total cost of inventory = (150 x 4.20) + (200 x 4.50) + (100 x 4.80) + (50 x 4.90) = $1,350 + $900 + $480 + $245 = $2,975

Total number of units = 150 + 200 + 100 + 50 = 500

Cost per unit = $2,975 / 500 = $5.95

To find the ending inventory balance, we need to multiply the number of units in ending inventory by the cost per unit.

Thus, the ending inventory balance is: 
(80 x $5.95) = $476

Therefore, the best choice is C, $2,715.

Santa Fe Tile Company Had the Following Inventory Purchases and Sales