Alphabet Company, which uses the periodic inventory method, purchases different letters for resale.Alphabet had no beginning inventory.It purchased A thru G in January at $4 per letter.In February, it purchased H thru L at $6 per letter.It purchased M thru R in March at $7 per letter.It sold A, D, E, H, J and N in October.There were no additional purchases or sales during the remainder of the year.
-Use the information above to answer the following question.If Alphabet Company uses the weighted average method,what is the cost of its ending inventory? (Round the per unit cost to two decimal places and then round your answer to the nearest whole dollar.)
A) $38
B) $48
C) $67
D) $75

Question

Quizplus · Accepted Answer

To calculate the weighted average cost, we need to calculate the total cost of all the letters purchased and divide it by the total units purchased.

Total cost = ($4 x 7) + ($6 x 5) + ($7 x 7) = $28 + $30 + $49 = $107

Total units purchased = 7 + 5 + 7 = 19

Weighted average cost per unit = Total cost / Total units purchased = $107 / 19 = $5.63 per unit

To calculate the cost of the ending inventory, we need to multiply the number of units left in inventory by the weighted average cost per unit.

Units left in inventory = B, C, F, G, K, L, M, O, P, Q, R = 11 units

Cost of ending inventory = 11 x $5.63 = $61.93

Rounding the answer to the nearest whole dollar, we get $67. Therefore, the correct choice is C.

Alphabet Company, Which Uses the Periodic Inventory Method, Purchases Different