Answer:
Option (A) is correct.
Explanation:
Dunbar sold 700 units during the month.
Dunbar uses FIFO inventory system,
Number of units available for sale = Beginning Inventory + Purchases
Number of units available for sale = 500 + 400
Number of units available for sale = 900
700 units sold includes 500 units of beginning inventory and 200 units of April 20 purchases.
Ending Inventory = Number of units available for sale - Number of units sold
Ending Inventory = 900 - 700
Ending Inventory = 200 units
Ending Inventory includes 200 units of April 20 purchases
:
Ending Inventory = 200 units × $2.50
Ending Inventory = $500