Question

Maxim Corp. has provided the following information about one of its products: Date Transaction Number of Units Cost per Unit 1/1 Beginning Inventory 200 $ 140 6/5 Purchase 400 $ 160 11/10 Purchase 100 $ 200 During the year, Maxim sold 400 units. What is ending inventory using the average cost method

Answer 1

Answer:

$48,000

Explanation:

The computation of ending inventory using average method is shown below

Total units = 200 + 400 + 100 = 700

Total cost = (200 × $140) + (400 × $160) + (100 × $200)

= $28,000 + $64,000 + $20,000

= $112,000

Average cost per unit = $112,000/700 = $160

Ending inventory = Total units - units sold

= 700 - 400

= 300

Therefore, cost of ending inventory = Ending inventory × Average cost per unit

= 300 units × $160

= $48,000