Castle TV, Inc. purchased 1,000 monitors on 5 January at a per-unit cost of $185, and another 1,000 units on 31 January at a per-unit cost of $230. In the period from 1 February through year-end, the company sold 1,800 units of this product. At year-end, 200 units remained in inventory.
-Assume that the net realizable value of this monitor at year-end is $210 per unit. Using weighted average cost flow assumption and the lower-of-cost-and-net-realizable-value rule, the ending inventory amounts to:

Question

Quizplus · Accepted Answer

To calculate the ending inventory using weighted average cost flow assumption, we need to calculate the weighted average unit cost as follows:

(10,000 units x $200 per unit) + (5,000 units x $220 per unit) / 15,000 units = $206.67 per unit

Next, we compare this cost per unit with the net realizable value of $210 per unit. Since the cost per unit is lower than the net realizable value, we do not need to write down the inventory value. Therefore, the ending inventory value is simply the number of units on hand multiplied by the cost per unit as follows:

15,000 units x $206.67 per unit = $3,100,500

Thus, the ending inventory amounts to $41,500 (choice C).