Use the information below to answer the following questions.
The following units of an inventory item were available for sale during the year:

$\begin{array}{ll}
\text { Beginning inventory } & 10 \text { units at } \$ 55 \
\text { First purchase } & 25 \text { units at } \$ 60 \
\text { Second purchase } & 30 \text { units at } \$ 65 \
\text { Third purchase } & 15 \text { units at } \$ 70
\end{array}$ The firm uses the periodic inventory system. During the year, 60 units of the item were sold.?
-The value of ending inventory rounded to the nearest dollar using average cost is
A) $1,353
B) $1,263
C) $1,375
D) $1,150

Question

Use the information below to answer the following questions.
The following units of an inventory item were available for sale during the year:

$\begin{array}{ll}
\text { Beginning inventory } & 10 \text { units at } \$ 55 \
\text { First purchase } & 25 \text { units at } \$ 60 \
\text { Second purchase } & 30 \text { units at } \$ 65 \
\text { Third purchase } & 15 \text { units at } \$ 70
\end{array}$ The firm uses the periodic inventory system. During the year, 60 units of the item were sold.?
-The value of ending inventory rounded to the nearest dollar using average cost is
A) $1,353
B) $1,263
C) $1,375
D) $1,150

Quizplus · Accepted Answer

To calculate the value of the ending inventory using the average cost method under a periodic inventory system, first, find the total cost of goods available for sale, then divide by the total units available to find the average cost per unit. Finally, multiply the average cost per unit by the units left in ending inventory.Total cost of goods available for sale:$$= (10 \times \$55) + (25 \times \$60) + (30 \times \$65) + (15 \times \$70)$$$$= \$550 + \$1,500 + \$1,950 + \$1,050$$$$= \$5,050$$Total units available for sale:$$= 10 + 25 + 30 + 15 = 80$$Average cost per unit:$$= \$5,050 / 80 = \$63.125$$Units in ending inventory:$$= 80 - 60 = 20$$Value of ending inventory:$$= 20 \times \$63.125 = \$1,262.50$$Rounded to the nearest dollar, the value of the ending inventory is \$1,263.

Use the Information Below to Answer the Following Questions The Firm Uses the Periodic Inventory System