Question

A company just starting business made the following four inventory purchases in June: Date Number of...

A company just starting business made the following four inventory purchases in June:

Date Number of units purchased Total cost
June 1 160 units $ 350
June 10 220 units 580
June 15 220 units 700
June 28 130 units      560
$2190


A physical count of merchandise inventory on June 30 reveals that there are 200 units on hand. Using the average-cost method, the amount allocated to the ending inventory on June 30 is

a) $600

b) $1204

c) $687

d) $455

Business   Accounting   
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Answer #1
The correct answer is option a i.e. $600
Number of Units Total cost
160 350
220 580
220 700
130 560
730 2190
Average cost per unit = 2190 / 730 = $ 3
Ending inventory = 200 Units * $ 3 = $ 600
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