The following lots of a particular commodity were available for sale during the year: $\begin{array}{ll}
\text { Beginning inventory } & 10 \text { units at } \$ 60 \
\text { First purchase } & 25 \text { units at } \$ 65 \
\text { Second purchase } & 30 \text { units at } \$ 68 \
\text { Third purchase } & 15 \text { units at } \$ 75
\end{array}$ The firm uses the periodic system and there are 25 units of the commodity on hand at the end of the year.
What is the amount of the inventory at the end of the year using the average cost method?
A) $1,685
B) $1,575
C) $1,805
D) $3,705

Question

Quizplus · Accepted Answer

The average cost per unit is calculated by dividing the total cost of all units by the total number of units: $(10 \times 60 + 25 \times 65 + 30 \times 68 + 15 \times 75) / (10 + 25 + 30 + 15) = 4,290 / 80 = 53.625$. The ending inventory is 25 units, so $25 \times 53.625 = 1,685.625$, rounded to $1,685.

The Following Lots of a Particular Commodity Were Available for Sale