Question

Given the following data, calculate the cost of ending inventory using the average cost method. (Round any intermediary and final answers to two decimal places.)
Date Item Unit
1/1 Beginning inventory 50 units at $15 per unit
4/25 Purchase of inventory 20 units at $20 per unit
5/19 Purchase of inventory 30 units at $25 per unit
12/31 Ending inventory 40 units

Answer 1

Answer:

Cost of ending inventory = $760

Explanation:

This can b calculated as follows:

Units of 1/1 Beginning inventory - 50

Units of 4/25 Purchase of inventory = 20

Units of 5/19 Purchase of inventory = 30

Total units available for sale = Units of 1/1 Beginning inventory + Units of 4/25 Purchase of inventory + Units of 5/19 Purchase of inventory = 50 + 20 + 30 = 100

Cost of 1/1 Beginning inventory = 50 * $15 = $750

Cost of 4/25 Purchase of inventory = 20 * $20 = $400

Cost of 5/19 Purchase of inventory = 30 * $25 = $750

Total cost of goods available for sale = Cost of 1/1 Beginning inventory + Cost of 4/25 Purchase of inventory + Cost of 5/19 Purchase of inventory = $750 + $400 + $750 = $1,900

Average cost per unit = Total cost of goods available for sale / Total units available for sale = $1,900 / 100 = $19

Therefore, we have:

Cost of ending inventory = Units of ending inventory * Average cost per unit = 40 * $19 = $760