Question

Davidson Electronics has the following: Units Unit Cost Inventory, Jan. 1 5,000 $ 8 Purchase, April 2 15,000 10 Purchase, Aug. 28 20,000 12 If Davidson has 7,000 units on hand at December 31, the cost of ending inventory under the average-cost method is ______

Answer 1

Answer:

$71,400

Explanation:

Average cost method uses a simple average of all items as follows:

Total cost = (15000 x 8) + (15000x 10) + (20000 X 12) = $510,000

Total inventory = 15000+15000+20000 =50,000

Average cost  = total cost  / total inventory = 510000/50000

= $10.2

Cost of ending inventory =  7000 units x $10.2 = $71400