Answer:
The amount reported for ending inventory is incorrect because management used a simple average instead of weighted-average to calculate the unit cost of inventory for the year.
Explanation:
a. Using weighted-average
Number of units available for sales = 100 + 400 + 800 = 1,300 units
Cost inventory available for sale = (100 * $2,800) + (400 * $3,000) + (800 * $3,200) = $4,040,000
Periodic cost per unit = $4,040,000 / 1,300 = $3,107.69
Total periodic ending inventory = $3,107.69 * 300 = $932,307.69
b. Using simple average
Inventory cost per unit = ($2,800 + $3,000 + $3,200) / 3 = $3,000
Total ending inventory = $3,000 * 300 = $900,000
Decision
The correct ending inventory should be $932,307.69
Therefore, the amount reported for ending inventory is incorrect because management used a simple average instead of weighted-average to calculate the unit cost of inventory for the year.
