Question

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

Beginning inventory	12 units at $52
First purchase	17 units at $53
Second purchase	25 units at $22
Third purchase	13 units at $57

The firm uses the periodic system, and there are 26 units of the commodity on hand at the end of the year. What is the ending inventory balance at the end of the year rounded to nearest dollar according to the average cost method? Do not round intermediate calculations.

Answer 1

	units	Unit cost	Total cost
Beginning inventory	12	$52	624
First purchase	17	$53	901
Second purchase	25	$22	550
Third purchase	13	$57	741
	67		$2,816

Average cost per unit = Total cost/Total number of units

= 2,816/67

= $42.0298507462

Ending inventory units = 26

Cost of ending inventory = Average cost per unit x Ending inventory units

= 42.0298507462 x 26

= $1,093 (Rounded to whole dollar)

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