Use this information to answer the following question.
A periodic inventory system is used.
-Using the specific identification method and assuming that 50 of the items left are from the October 13 purchase and the rest are from the October 20 purchase,the cost assigned to ending inventory is
A)$3,840.
B)$3,312.
C)$3,372.
D)$3,176.

Question

Use this information to answer the following question.  
A periodic inventory system is used.
-Using the specific identification method and assuming that 50 of the items left are from the October 13 purchase and the rest are from the October 20 purchase,the cost assigned to ending inventory is
A)$3,840. 
B)$3,312. 
C)$3,372. 
D)$3,176.

Quizplus · Accepted Answer

Using the specific identification method, we can determine the cost of ending inventory by identifying which units were sold and which units remain in inventory. 
Out of the 100 units in ending inventory, 50 units are from the October 13 purchase and 50 units are from the October 20 purchase. 
Cost of 50 units from October 13 purchase = 50 units x $62 per unit = $3,100
Cost of 50 units from October 20 purchase = 50 units x $68 per unit = $3,400
Total cost of ending inventory = $3,100 + $3,400 = $6,500 
However, since only half of the ending inventory is from the October 13 purchase, we need to adjust the cost by the weighted average cost. 
Weighted average cost = ($3,100 x 0.5) + ($3,400 x 0.5) = $3,250 
Therefore, the cost assigned to ending inventory is $3,250, which is closest to option C ($3,372).

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