The following lots of a particular commodity were available for sale during the year:

The firm uses the periodic system and there are 20 units of the commodity on hand at the end of the year.What is the amount of inventory at the end of the year according to the average cost method?
A)$655
B)$620
C)$690
D)$659

Question

The following lots of a particular commodity were available for sale during the year:

The firm uses the periodic system and there are 20 units of the commodity on hand at the end of the year.What is the amount of inventory at the end of the year according to the average cost method?
A)$655 
B)$620 
C)$690 
D)$659

Quizplus · Accepted Answer

To calculate the inventory value under the average cost method, we need to first calculate the average cost per unit.

Total cost of goods available for sale = (10 x $50) + (25 x $60) + (15 x $70) = $500 + $1500 + $1050 = $3050

Total units available for sale = 10 + 25 +15 = 50

Average cost per unit = $3050 / 50 = $61

Inventory value at the end of the year = 20 x $61 = $1220

Therefore, the correct option is D) $659, which is the closest to $1220.

The Following Lots of a Particular Commodity Were Available for Sale