Exhibit 7-4 RJ, Inc. had the following activity for an inventory item during June:
-Refer to Exhibit 7-4. Assuming RJ, Inc. uses a periodic weighted average cost flow assumption, ending inventory for June would be
A) $512
B) $560
C) $768
D) $720

Question

Exhibit 7-4 RJ, Inc. had the following activity for an inventory item during June:  
-Refer to Exhibit 7-4. Assuming RJ, Inc. uses a periodic weighted average cost flow assumption, ending inventory for June would be
A) $512 
B) $560 
C) $768 
D) $720

Quizplus · Accepted Answer

The correct answer is A because the periodic weighted average cost flow assumption means that the ending inventory is calculated by multiplying the average cost per unit by the number of units in ending inventory. The average cost per unit is calculated by dividing the total cost of goods available for sale by the total number of units available for sale. In this case, the total cost of goods available for sale is $1,280 (beginning inventory + purchases) and the total number of units available for sale is 20 units (beginning inventory + purchases - sales). Therefore, the average cost per unit is $64 ($1,280 / 20). The ending inventory is 8 units, so the ending inventory value is $512 (8 units x $64 per unit).