RJ Corporation has provided the following information about one of its inventory items: During the year, RJ sold 3,000 units. What was ending inventory using the average cost flow assumption under a periodic inventory system?
A)$640,000.
B)$840,000.
C)$770,000.
D)$880,000.

Question

RJ Corporation has provided the following information about one of its inventory items:  During the year, RJ sold 3,000 units. What was ending inventory using the average cost flow assumption under a periodic inventory system?
A)$640,000. 
B)$840,000. 
C)$770,000. 
D)$880,000.

Quizplus · Accepted Answer

Since the average cost flow assumption is used, we need to calculate the weighted-average cost per unit first.

Total cost of goods available for sale = (Beginning inventory + Purchases) x Cost per unit 
= (5,000 + 8,000) x $110 
= $1,430,000

Weighted-average cost per unit = Total cost of goods available for sale / Total units available for sale 
= $1,430,000 / 13,000 
= $110

Thus, ending inventory can be calculated as: 
Ending inventory = (Units on hand at end of period) x (Weighted-average cost per unit) 
= (5,000 - 3,000) x $110 
= $220,000

Therefore, the best answer choice is C.

RJ Corporation Has Provided the Following Information About One of Its