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A company just starting its business made the following four inventory purchases in June:
On June 25, the company made its first sale when a local customer purchased 500 units for $3,500.The company uses a perpetual inventory system.
-Using the average cost formula, the cost of the ending inventory on June 30 is
A)$670.00.
B)$690.50.
C)$1,645.55.
D)$1,675.00.

Question

Use the following information for questions 
A company just starting its business made the following four inventory purchases in June:
  On June 25, the company made its first sale when a local customer purchased 500 units for $3,500.The company uses a perpetual inventory system.
-Using the average cost formula, the cost of the ending inventory on June 30 is
A)$670.00. 
B)$690.50. 
C)$1,645.55. 
D)$1,675.00.

Quizplus · Accepted Answer

The average cost formula calculates the cost of ending inventory by dividing the total cost of goods available for sale by the total units available for sale, then multiplying by the ending inventory units.

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