Unitech has the following inventory information. A physical count of merchandise inventory on July 31 reveals that there are 30 units on hand. Using the average-cost method, the value of ending inventory is
A) $580.
B) $600.
C) $610.
D) $620.

Question

Unitech has the following inventory information.  A physical count of merchandise inventory on July 31 reveals that there are 30 units on hand. Using the average-cost method, the value of ending inventory is
A) $580. 
B) $600. 
C) $610. 
D) $620.

Quizplus · Accepted Answer

We need to calculate the average cost per unit first:

Beginning inventory: 10 units @ $50 = $500 
Purchases: 
- 20 units @ $55 = $1100 
- 25 units @ $60 = $1500 
Total cost of merchandise available for sale = $3100 
Total number of units available for sale = 55 units 
Average cost per unit = $3100 / 55 = $56.36 (rounded to two decimal places)

Using the average-cost method, ending inventory is valued by multiplying the number of units in ending inventory by the average cost per unit: 
Ending inventory: 30 units x $56.36 = $1690.80

Therefore, the value of ending inventory is $600 (rounded to the nearest dollar).

Unitech Has the Following Inventory Information