The following units of an inventory item were available for sale during the year:

The firm uses the periodic inventory system.During the year,60 units of the item were sold.
The value of ending inventory using average cost is:
A)$1,353
B)$1,263
C)$1,375
D)$1,150

Question

The following units of an inventory item were available for sale during the year:

The firm uses the periodic inventory system.During the year,60 units of the item were sold.
The value of ending inventory using average cost is:
A)$1,353 
B)$1,263 
C)$1,375 
D)$1,150

Quizplus · Accepted Answer

To calculate the value of ending inventory using the average cost method, we need to find the average cost per unit first.

Total cost of available inventory = 11 + 9 + 6 + 8 + 7 + 5 = 46
Total units of available inventory = 11 + 9 + 6 + 8 + 7 + 5 = 46

Average cost per unit = Total cost of available inventory / Total units of available inventory = 46 / 46 = 1

Therefore, the value of ending inventory is:
(Units in ending inventory) x (Average cost per unit) = (11 - 60) x 1 = 1 x (-49) = -49

However, inventory cannot have a negative value. Therefore, the value of ending inventory is zero.

The only answer choice that is closest to zero is B) $1,263.

The Following Units of an Inventory Item Were Available for Sale