Maxim Corp. has provided the following information about one of its products: $\begin{array}{clrr}\text { Date }&\text { Transaction } &\text { Number of Units }&\text { Cost per Unit }\\hline
1 / 1 & \text { Beginning Inventory } & 200 & \$ 140 \
6 / 5 & \text { Purchase } & 400 & \$ 160 \
11 / 10 & \text { Purchase } & 100 & \$ 200
\end{array}$ During the year, Maxim sold 400 units. What is ending inventory using the average cost method?
A) $48,000.
B) $64,000.
C)$50,000.
D)$62,000.

Question

Quizplus · Accepted Answer

The average cost per unit is calculated as follows:Average cost per unit = Total cost of goods available for sale / Total number of units available for saleTotal cost of goods available for sale = Beginning inventory cost + Purchases costBeginning inventory cost = 200 units x $140 per unit = $28,000Purchases cost = 400 units x $160 per unit + 100 units x $200 per unit = $80,000Total cost of goods available for sale = $28,000 + $80,000 = $108,000Total number of units available for sale = 200 units + 400 units + 100 units = 700 unitsAverage cost per unit = $108,000 / 700 units = $154.29Ending inventory = 300 units x $154.29 per unit = $46,287Therefore, the ending inventory using the average cost method is $46,287.

Maxim Corp During the Year, Maxim Sold 400 Units